Who will look after your children if you and your partner die?
It may not be a pleasant thing to think about, but it happens more commonly than you might expect.
Numbers are hard to come by. But in around one in every 160 couples, both parents will die between the age of 30 and retirement.
Some may be childless, others may have remarried since their partner died, but a significant proportion of these will be parents of dependent children.
What happens next is up to you. And if you haven’t already thought about it, today is the best day to start.
The Law varies between States and Territories
The laws that govern what happens when you die or can no longer make decisions for yourself are different in each state or territory. They are complex and when it comes to your children they interact with Family law. I’ve looked at the financial aspects of death
previously but in this article I want to deal with the implications for care for your children.
Your directions may not necessarily be binding and may be challenged at the time – usually by a biological parent or step parent – but will be settled in the best interests of the child as determined by the Family Court.
You should still put it in your will as an expression of your wishes. Your lawyer can help reduce probability of challenge and prepare you for it especially if you believe that the most likely person to mount a challenge is not suitable.
A Will kit or online bot will usually not be sufficient as they usually don’t show context. Your lawyer’s file notes will provide context as to how you came to that conclusion.
Who can I appoint as a Guardian?
Generally it’s up to you to decide and most people choose parents, siblings or close friends. You don’t even need their consent to name them. They may choose to not accept the appointment when the time comes.
Legally, not everyone can be a guardian though. Some of these restrictions should be obvious. In NSW for example, someone who can’t take care of themselves, is under 18, or has committed a crime of domestic violence, abuse or neglect may not be appointed. More surprisingly, a convicted felon, a person who has filed for bankruptcy within the last 7 years, or has been suspended or disbarred from the practice of law, accounting, or a profession that involves managing money and requires a state license are also prohibited.
So how do you choose as guardian for your children?
Here are the things you should consider:
- Start with your values including cultural, education, and religious preferences.
- Consider your children’s care needs. Do they have special needs?
- Note your logistical preferences such as location, schools and proximity to family.
- Identify the available people. Start wide and then narrow down. If you are doing this as a couple it’s a good idea to do it separately first and then compare notes.
- If you have older children (generally 13 or older) – involve them. How much you share is up to you. But their opinion is highly relevant so ask them in advance. Older kids have social relationships which may be more important than family - Community, friends, school church groups. Make sure you take these into account.
- Do you want to keep siblings together?
Plan for today’s circumstances – you never know when this plan will need to be actioned. So don’t exclude your parents just because they might be too old at the time. If they are the best list them first – they can always choose not to accept – It’s voluntary. But do consider the potential impact on your child of having to deal with a second loss when your already elderly parents eventually die.
Your guardian can be different to where they live. For example they might stay with family or friends near school during term time, while they spend time with their legal guardian who lives elsewhere.
Consider those who you wouldn't want
Is there someone in your family or your partners family who is not suitable? Drug or alcohol abuse or gambling addiction might make you think twice. Perhaps a history of abuse?
Much of this may not be widely known or reported. But you need to consider it. There’s no need to list why, but it is important to communicate somewhere so it can be known at the time.
Your lawyer can keep file notes or you may wish to write a letter explaining your decisions – perhaps password protected to be revealed only at the time.
Make your intentions clear
Be specific about your wishes. Generally avoid appointing a couple, especially when you really mean one of them (who just happens to be married to the other) – name the one you mean.
Add conditions. You might want to appoint your sister but don’t trust her husband or she lives overseas for now. You could add a condition that she act only if separated from her now partner or relocates. If single consider the impact a future relationship might have.
Ensure you preserve wider family relationships especially if there is a risk these might be cut off or discouraged.
Create a letter of wishes – a letter to your executor and to the guardians – setting out your expectation that they will help foster and encourage relationships with other side of family. Consider funding for travel to maintain this.
Have a backup plan
You can appoint as many people as you choose and specify the order in which they should be asked to act at the time. Have at least two backups in case the first is unable or unwilling to act – maybe more if first choice is likely to have passed away
What happens if you can’t agree?
Sometimes couples just can’t agree on who to appoint. For some, this may be a sign of deeper unresolved conflicts. If so - seek professional help from a therapist or counsellor. It can be expensive to have these arguments in your lawyer’s office – so sort them out first.
But don’t let this delay you dealing with everything else in your estate planning. You can leave this bit for later. Better still you can appoint separately at least for now.
What about the money?
Do you have enough assets to deliver on what you’ve planned? Will you leave enough to make life comfortable, pay for schooling, provide for a big enough home (yours may not be suitable or be mortgaged), provide for respite care, and perhaps travel for distant relatives.
Consider this in your insurance plan – ask your Sherpa.
Is it OK if guardian benefits too? If they will move into a home you provide or need to upgrade theirs to cope, will they pay rent or other contribution to the costs or will estate cover the lot? You should provide guidance to your executor. Your lawyer will help here.
What do you want to happen when your child turns 18? Do youwant the arrangements to continue? When will your child get access to the remaining assets? What about the guardian?
These are all trade-offs between the needs of the children and those of the guardian. You will need to ensure there are sufficient resources to manage both and that the executor has enough guidance to make these trade-offs the way you would wish.
You will need to consider the right structure to provide for your children and their guardian.
This means getting your will and related structures right.
Your superannuation (including life insurance owned by your super fund) is not an estate asset so isn’t dealt with by your will unless you have directed the super fund trustee to pay it to your legal personal representative. There are potential tax liabilities here, so get the right advice. Ask your Sherpa.
Similarly, your home and other assets held jointly pass directly to the joint owner and are not included in your estate.
Estate assets go from your name to the executor of your will on your death to be dealt with in accordance with your will. Amounts to be paid to adult beneficiaries can then go to them.
If the beneficiary is a minor (under 18) the executor will hold it until they turn 18 (or a later age you set in your will) and invest and manage for that time.
The relationship between guardian and executor is critical to ensuring this runs smoothly. The guardian will make requests for money to provide for the maintenance, education, and well-being from the Executor. The Executor will need to assess these requests and pay the appropriate amount. They must be able to work well together.
There is a balance to be struck between providing for a secure and happy childhood and at the same time preserving a nest egg to set them up as adults.
Your will is an important toll in ensuring this is achieved.
Can your executor and the guardian be the same person?
Legally yes they can, but you need to consider the risks. Without the additional checks and balances the money may not last or be spent appropriately. Ask your lawyer.
Ask the people you propose to appoint (but you don’t need their agreement). Tell them what it entails. Let them know you have adequate insurance and how they will work with executor. You don’t have to share everything right now and there is no need to tell them the order they appear in the list.
Don’t be upset if they say no. It’s a big job and it’s better they say no now than at the time.
Let them know where everything is – include lawyer’s details. Don’t leave a mess behind. This is especially true now that much of our data is on-line. Is it backed up? Do they know where to find it and the relevant passwords?
What about your incapacity?
So far we’ve dealt with you (and your partner’s) death. But what if you become incapacitated and can’t make decisions for yourself?
This is why you have a power of attorney for most decisions. But you can’t appoint a guardian under a power of attorney.
So ask upfront for your nominated guardian to be proactive. Ask your lawyer to share the relevant clause in will (not necessarily the whole thing) and relevant file notes.
Whatever you do – get advice
The future of your children and partner is at stake here so don’t cheap skate here. Get the right help. Your Sherpa can guide you in the right direction.