How to Protect Your Child’s Future: Wills, Trusts & Guardianship Explained with the Estate Planning Mom | Ep. 98

0:00In this circumstance, it's almost like a custody battle, right? Especially if there's no legal documentation in place. It's people that maybe you've had conversations with that are petitioning the court. Maybe there's people in your family that you would never want to be guardian of your children that are now petitioning the court. But because you have no legal documentation in place that says who you would want or don't want, the court is making a decision based on guardianship on who they think is going to be in the best interest of the kids. And that's what their decision is based on. Another thing that I see is people trying to nominate couples because somebody is married.

0:35Right. So I generally recommend listing the person that you would actually want to be guardian. Right. So if it's your sister, it's your sister. It's not necessarily your sister and her husband or spouse. It's your sister and just your sister. Right. Because if it's your sister and her spouse and something were to happen to your sister, would you want your kids to go to her spouse? maybe maybe not

1:02Learning To Mom:hi mom friend I'm Layla the host of the learning to mom podcast thanks so much for being here we're going to be great mom friends I know it this is the podcast where you get your first time mom questions answered by experts in the field of prenatal postpartum and pediatric health here on the learning to mom podcast we discuss the challenges of motherhood but don't just stop there complaining about it here you'll be encouraged and supported to overcome the hard with the right tools and knowledge while finding that motherhood is full of joy and fun. I'm so glad to have you here. Let's learn together.

1:38Learning To Mom:Each expert guest comes with their own perspective and background, so please note the content presented in this podcast is designed for general educational purposes only and is not a substitute for personal and professional medical advice, diagnosis, or treatment. Hi, Krista. Welcome to the Learning to Mom podcast. Thank you for having me. I'm excited to be here. I'm really glad that you're here. I have a lot of questions for you, so I want to get started. But before we do just that, do you mind just introducing yourself to the listeners and sharing what spurred you to start estate planning mom?

2:09I am an estate planning attorney licensed in California. And as I had my first child, which was over nine years ago now, I was practicing as an attorney and estate planning was an area that I really enjoyed. But as a new mom, it occurred to me that most parents do not know how to put legal plans in place when they have minor children. And so that was my focus. I was going to mom's groups. I was going into homes of moms and literally doing presentations on how to protect families and protect their kids with my baby on my hip. Right. So I kind of got known in my community as the estate planning mom.

2:52It was kind of just, it came up one day at a play date and I was like, yes, absolutely. And it just stuck from there. And so, um, to me, it's always been about educating. Yeah.

3:03Learning To Mom:Well, I'm really excited to be educated by you today because this is something, so my oldest, I don't, she'll probably be around three by the time that this episode comes around. And this is a topic that my husband and I always talk about needing to do, but like don't know where to start, don't know what to do. So I'm really excited to have you here. First and foremost, to someone who may not be aware, what even is family estate planning and why is it important? So family and estate planning can sometimes get intertwined and they may be two different areas of law. So when we talk about family law, that's more of like divorce, prenuptial agreements, anything when it comes to that kind of conflict or settling things within a family, then we look at estate planning.

3:53And so the estate planning is really planning for if you were to get sick or if you were to pass away, right? What happens to your kids? What happens to your assets? It also can sometimes refer to the act of when somebody has passed administering their estate. So whether it's having to go through probate court, or maybe they had a trust in place, avoiding probate and having to have that administered. So are they two different like terms? It can be interchangeable because sometimes we talk about family trust, but from an area of law practice, it's family law and then estate planning.

4:29Learning To Mom:Okay, great. So today it's estate planning. Today is estate planning. Yes. That is what we were focusing on. So, well, then there's a misconception about, about estate planning that I never knew. What are the other misconceptions around family Brown? I'm going to mix them up the whole time.

4:50So oftentimes people think that if, you know, if they're young and they don't have money, right. They don't have an estate as they will say that they don't need to have any legal plans in place. And that is just not true without any documentation. If something were to happen to you, and especially for families that have young minor children, right? Anybody under the age of 18 is considered a minor. The court would have no idea who you would actually want to be guardians because there's nothing legally in writing that says, here's who I would want to take care of my children. And so while you can say, well, I have God parents that we had done through our church, or my sister would just take my kids or my parents would just take my kids.

5:32That's not guaranteed because there's nothing legally in writing, right? And so it's important, especially for parents with minor children to have legal documents in place that say, if something were to happen to me and the other parent of my child, this is who I would want. Because again, the court has no idea who you would want to be guardians if something were to happen to you.

5:55Learning To Mom:So that's actually a question that I have of what happens to children if both parents pass away without anything in place? Yeah. So generally you would have family members or friends that would come forward and petition the court for what we call guardianship of the children. And in this circumstance, it's almost like a custody battle, right? Especially if there's no legal documentation in place, it's people that maybe you've had conversations with that are petitioning the court. Maybe there's people in your family that you would never want to be guardian of your children that are now petitioning the court, but because you have no legal documentation in place that says who you would want or don't want, the court is making a decision based on guardianship on who they think is going to be in the best interest of the kids.

6:38And that's what their decision is based on. And again, that's why it is so important to have some type of legal documentation in place to say who you would want to be guardians.

6:48Learning To Mom:So I'm curious, would they just, is the default like whoever is the most well-off? Not necessarily. So there's a lot of things that go into play. Maybe how well did they know the children? Are there other kids that the family has? Where do they live? What are the ages of the guardians? What are the ages of the kids? So there's different factors that come into play that would go into the court deciding. Okay. Very good to know. This is amazing. Okay. Then when we talk about the documentation that you need, to be honest, I just know of like a will and a trust. Is that what we're talking about? Is there something else?

7:29Learning To Mom:And then also what even is the difference between a will and a trust? Okay. So let's take the question in a couple of parts. So when we talk about estate planning, it makes up all of these things, which includes a will and a trust and power of attorney, advanced healthcare directive, HIPAA authorization, guardian nomination, certificate of trust, right? All of these legal documents that do a bunch of different things, right? Some work together depending on what your plan looks like, but it is, it is very complicated, right? And to a lay person that has no experience kind of in this world, it is very complicated and very, very confusing.

8:12It's not just the two documents. It's a set of documents. We call it a comprehensive estate plan. So the difference between a will and a trust is a will is a legal document where you give specific instructions to be carried out at your passing. So in your will, you can say, I want my assets to go here. I want these guardians to be for my children. It's something were to happen to me. A will is only filed with the court upon your passing, thereby becoming a public record. And so having a will alone almost guarantees probate court because you're basically telling the court, here are my wishes. And then it goes through that process.

8:53A trust on the other hand is an agreement and it's agreement between the grantor, which is the creator of the trust and the trustee sometimes known as an executor. and the grantor put specific instructions in writing for the trustee to be able to follow these instructions. If the person who created the trust, that grantor were to become sick or were to pass away. And so while someone is alive and they have a trust or a revocable living trust or a living trust, these all mean the same thing. They are in charge of their trust, right? They are the ones who created it. They are the ones who are in charge and they are the ones who benefit from it.

9:35So all of the assets, like if you own a home, you put your home in the name of your trust, all of those assets would then be under the person's control because they're still alive, right? They have the ability to make changes to their trust, update it, add assets to it, do anything that they want to. The difference between having a trust is a trust avoids probate court. And so that's how we keep costs down. We keep things private and we make it so that especially with minor children, we have specific instructions in the trust that say, how are your kids going to be protected avoiding court to make sure that money is going to be held for them for their benefit.

10:15If something were to happen to you.

10:17Learning To Mom:So in your comprehensive estate plan is a will, not in that it is, but we call it a pour over will. And the idea says is that if you have this trust. And then you have a pour over will. If something gets left outside of your estate, like let's say you left a bank account out or something, rather than having to file the law with probate court to go through probate, we're just going to say, nope, that bank account is just going to go right into the trust. It's just going to get poured over kind of like a backup net. So when we do a comprehensive plan, we have both. Okay. That makes sense. Is there such a thing is a living will.

10:56Learning To Mom:Did I make that up? Yes. No, you did not make it up and it adds more confusion to it. So a living will is not the will that I was just talking about. A living will is actually referring to a healthcare directive. And so it is healthcare wishes. And it's basically just, if you were to get sick, here's end of life decisions, right? Would you want cremation? Would you want burial? Would you want organ donation for transplant purposes? You know, any of these things, that is what you would go in your living well or healthcare directive. Okay. So when you are like thinking through how, you know, all of your assets and stuff, do you just include them all in the trust or do I have to go through and log into every single investor account I've ever made and like add beneficiaries?

11:52So a couple of different things there. So when we meet with clients, we have a list of all of their assets and then depending on what their plan is made up of, we will go through and say, okay, you need to rename this one in the name of the trust or this one, the beneficiary designations need to get changed. And so it just depends on what your strategy is on what you would want to happen if something were to happen to you. And I know it is a pain to go in and change those things, but when you do this, you only have to do it once, right? And then once you have it done, any accounts you open in the future, you just know automatically, Oh, I have a trust.

12:27I'm just going to put it directly into my trust. So you don't have to change it again. It's a little bit more effort in the beginning, but it saves so much time and complications later if something were to happen.

12:39Learning To Mom:Okay. That makes sense. And question that I think a lot of first-time parents who this is the first time they're ever even considering this. Can you like change the things later on? You know, say you want it, the kids to go to your sister and then your sister gets terminally ill or something. Absolutely. Yes. You can make any changes to your plan. And that is probably the number one thing that our clients change is guardianship going in and actually changing who they want to be guardians. I had a client one time, she and her husband, we, I think we did planning on like a Friday and they had their guardians named.

13:15We, we drew out their whole plan. And then I kid you not Monday morning, she calls me and she says, Hey, hold off on our guardians. We just went camping with them and we didn't like how they treated their kids. So we're going to find new guardians. so yeah but that's the whole part with estate planning is your life you're going to go through different things within your life right different people there's going to be different life events that happen and you always have the ability to make those updates to make sure that whatever your wishes are they can be updated to to work with what is going on with your family situation at that point.

13:51Okay.

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15:12Learning To Mom:What do you advise parents to really think through when they're thinking through who should we have as our guardian? Generally, I will recommend to parents if they're having a tough time deciding is just take out a sheet of paper and write down a list, write down a list of everybody that's an option, right? All of the possibilities. And from that list, and I'll give you some criteria of characteristics and things to look for that maybe will help kind of refine that list, but just go through that list and put an order from one to three. Cause I generally will recommend identifying one primary and two backups.

15:50Just write it down who you feel like in this exact moment, this is the top three that I would want in this order. And then put the piece of paper away and let it sit and then come back to it. And if you had a horrible feeling, it wasn't the right decision. Then you know, right? Some of the characteristics I think are important are how old are your children? So when you're looking at naming guardians, how old are the guardians compared to your kid's age? Because sometimes we say, well, you know, I would want my parents to be guardians, but if you have a six month old and a two-year-old and your parents are 75, that might be really hard on both your parents and the kids, right?

16:32What kind of life is that going to be for both of them. It's always your personal decision to be able to make this. And it's your decision, right? When you nominate guardians, you don't have to tell the guardians what order they're in, right? I always recommend you talk to them and say, Hey, I'm nominating guardians for my children. Are you, would you be okay to be a guardian if something happened? And it's, it, they don't necessarily know what order they're in, but they just know that they are a potential guardian. Okay. So age is one thing that I look at where do they live and where do you live?

17:08Is it going to be a big move for the family? If something were to happen, are they going to have to move cross country, especially for some of our families that have kids that are in high school, this is going to be a huge impact taking them out of high school and moving them cross country. Okay. So if it's generally, if it's younger babies, they may not have much of an impact with a friend perspective and family around, but it's always something to consider. Is the guardians that you're naming, do they have kids of their own, right? Are they going to be able to handle any more children if they already have kids?

17:40Is it going to fit their lifestyle of what they want? How well do they know your kids? If something were to happen and they had to go with the guardians, you want them to feel comfortable and have a loving relationship with these guardians because they're already in this stressful and emotional situation.

17:58Learning To Mom:Right. So it's important that they have this relationship already built with them and guardians do not have to be relatives. They can be friends that are really close family friends to you that your kids know and that you love and they will love your kids and they will do everything for them because it's your choice when choosing. I will say one of the other things that I find that can be a challenge is if maybe you and your spouse don't agree on guardians. This is where we are. Yeah. This is, this is the other one that I see. And so I will say that it's definitely a conversation that you have to talk through and probably make some compromise.

18:41Like, okay, well, if I'm going to have this one as a primary, then we're going to have this one as a backup.

18:45Learning To Mom:Okay. And when you say primary and backups and such, is it just like if you have the primary and they say no, or they're sick or they've passed away or they can't do it for any reason, then you have the second person that you've named. Another thing that I see is people trying to nominate couples because somebody is married, right? The couple automatically gets put on as a guardian and they don't, you know, they don't have any relationship with the kids. they're not, you know, it's just besides marriage. So I generally recommend listing the person that you would actually want to be guardian. Right.

19:21So if it's your sister, it's your sister. It's not necessarily your sister and her husband or spouse. It's your sister and just your sister. Right. Because if it's your sister and her spouse and something were to happen to your sister, would you want your kids to go to her spouse? Maybe, maybe not. Maybe you'd want it to go to the next person on the list. Right. And so that way it just makes it very clear with what your intentions are.

19:48Learning To Mom:Okay. No, that makes so much sense. One of the things that I see changes very often on is when somebody has listed a couple, because that's what they wanted to do. And guess what? The couple got divorced and now they have to go in and update all of their estate planning documents and pay this money because their friend got divorced. And then you take the couple off.

20:10Learning To Mom:so let's say you only have minor children okay how do i word this the guardianship piece we've talked about how does the financial piece work before they're 18 or you know if you do want your kids to get all of your money like what do you do yeah so within the guardianship generally especially if there's no legal documents in place so let's look at it on both sides so let's say no legal documents in place, the guardian that would be petitioning the court would likely petition the court for guardianship of the kids, the person, as well as their property, their assets. And so in California specifically, and I'm sure other States are very similar.

20:49The money, isn't just going to be released to the guardian. It's actually going to go into a court blocked account where the kids can't inherit that money until they turn 18 years old. And so for all of these parents that get life insurance policies because they have minor children. Now, when they list their minor kids as a beneficiary on that life insurance policy, what they're doing is they're saying, okay, well, if something happens to me, that money is going to have to go through court because the life insurance company isn't going to release it to anybody. It's going to have to go into this court block to count.