“Why any kid would want to be an orphan is beyond me.”
– Mrs. Hannigan, Orphan Annie
It is pretty amazing the difference a little planning can make in the life of an orphaned child. Let’s take a quick look at an unplanned outcome versus a planned one.
Let ’s assume that the minor child (under the age of 18) has two parents. When one parent dies, the other parent usually has all of the rights to the surviving child. This is so even if the parents were divorced and the deceased parent had managing conservatorship rights, or the parents were never married and the biological surviving parent was never actively involved in the child’s life. There is an exception if there was an existing court order giving third-party rights to the child.
In the usual scenario, what “rights” does the surviving parent have? Those fall into two categories: the right to manage the child’s “person” (residence, school, medical care) and “estate” (property and inheritance).
Absent a contravening court order, there is little that the deceased parent could have done to change the right of the surviving parent to manage the person of the child.
There is a lot, however, that the deceased parent could have done to protect the child’s inheritance from the surviving parent’s control. The deceased parent could have executed a will that left the inheritance to a trust, with the trustee being someone other than the surviving parent. Or the deceased parent could have already have transferred all of the funds to a revocable trust so that the assets never passed through his or her probate estate.
Now let’s go a step further:
Let’s assume both parents are deceased. Who gets to raise the orphaned child and handle the child’s inheritance?
- Absent a written document or prior court order, the probate court will appoint a guardian of the person.
- The choice goes by ascendancy – grandparents, the child’s siblings, aunts, and uncles, then cousins.
Both sides of the family have equal rights.
Regarding the inheritance, the current trend is for the court to create a management trust and appoint a corporate trustee to handle the money.
To avoid this sterile and conflict-filled result, the parents could have drafted wills that stated their choices for people to serve as guardian of the child. The court will give deference to the parents’ choices. The court may also take into account the child’s wishes.
For the inheritance, the conservative bet is for the parents to set up a trust and appoint a trustee to handle the money. Most trusts will direct the trustee to distribute funds for the health, education, maintenance, and support of the child, and then hold the remainder of the funds until the child reaches a stated age.
Most parents spend more time planning for their children’s soccer games than they do planning for their children’s future in the event of a catastrophe. That is a huge mistake.
Virginia, a 1982 SMU law school graduate, has advised clients for over 35 years. For more information, visit hammerle.com, and for newsletter sign-up, email email@example.com. This column does not constitute legal advice.