Attorney James Jones: [00:00:00] Imagine this, you’re no longer here to guide your children who will step in to raise them, manage their inheritance, and secure their future. It’s a question no parent wants to face, but avoiding it can leave your kids vulnerable. In today’s episode of Legacy Talk, which unpacking the critical tools that every Washington parent needs guardianships to ensure that your children are cared for by someone that you trust.
And trusts to safeguard their financial future from pitfalls like mismanagement or creditors. Join us today in this episode as we break down 10 essential talking points, share real world insights, and give you actionable steps to protect your kids with confidence and peace of mind. This is one episode you can’t afford to miss us.
You are listening to the legacy talk podcast hosted by James A. Jones, attorney at law and founder of sound legacy law, PLLC in Tacoma. Attorney Jones is here to talk about how to best protect your family assets and well, pulling stories from his more than 20 years of helping [00:01:00] families and business owners protect their assets, create their estate plans, preserve their wealth and plan for the future.
Nobody wants to think about estate planning, but life has a way of sneaking up on you and. And at any moment, something unexpected could happen that will leave you regretting not having acted sooner. So join attorney James A. Jones in the Legacy Talk podcast and together learn how to plan for your future today and have peace of mind tomorrow.
Attorney James Jones: Welcome to Legacy Talk. I am your host, James Jones. On today’s show, like I said, we are talking about protecting your kids. With guardianships and trusts, and I always start my episodes with a story, as you know, if you’re a regular and faithful listener. Today’s story is about the Jensen family. Now, this is a tragic story.
Both parents were tragically killed in an automobile accident involving three children who were left without parents. They had done a form will without the help of an attorney, so [00:02:00] they had a will. That they did on their own. The will was simple and it provided that Mrs. Jensen’s brother Jared acts as both guardian of the children and trustee of their minor’s trust.
Now, Jared was a good person who had had similar values as his sister appeared successful in managing his personal finances. He and his wife Susan, loved the Jensen kids as their own. Jared and Susan had two children of their own, and with the addition of the Jensen’s three had a full house. Jared decided that they no longer needed such a small house, but a larger house to accommodate the new family, but they didn’t have the ability to afford one without using money from the trust that was set up for the Jensen’s children.
He withdrew and used a sizeable amount of that trust money in order to put a large down payment on the house, leaving only a fraction of the original trust funds for things like the education of the children. He closed on the house in his own name without regard to the trust’s contribution to the ownership.
Meanwhile, as Jared and Susan’s house continued to appreciate and [00:03:00] value, they skimmed off equity through refinances to pay that on their own consumer debt. Jared and Susan did a fine job raising the Jensen kids, but due to Jared’s mismanagement of the minor’s trust when it came to paying for college, the minor’s trust didn’t leave adequate funds to pay for it.
The oldest Jensen child was forced to sue his uncle Jared for breach of his fiduciary duty and mismanagement of the trust assets. But since there was no equity in the house and Jared and Susan had limited personal assets, he and the other children were unable to be made whole. The children were left with an uncollectible judgment and ultimately had to borrow money for their own college expenses that their parents had provided.
This is a story, a cautionary tale that we’ll get into today, on today’s episode regarding the separation of roles of the guardian and trustee. ‘ cause had that been done, this terrible outcome could have easily been prevented. So today we’re talking about how we can make it so that our children are protected.
First of all, by having someone [00:04:00] monitor them, like take care of them. Right? And then have someone help them with their money ’cause minor kids cannot own assets in their own name. So why do we have to do anything if we have minor kids like James, I don’t have any assets. Why do I need an estate plan? I’ve just got these kids.
It’s important to name a guardian, right? You have to name a guardian for your minor kids because they don’t have legal capacity or legal authority, or you know, the legal right to make decisions. Every Washington parent should designate a legal guardian and their will to ensure that a trusted person is there to care for their kids.
If both kids pass away or become incapacitated. Now naming a guardian in your will. Prevents a court appointed guardian that may not align with your personal wishes, and it makes sure that the kid’s emotional and physical stability is maintained with a familiar caregiver in most cases, like a parent or a friend or a family member.
And it also provides clarity, if you name it in your will, it provides clarity for family members as to who you want, right? Which reduces [00:05:00] disputes. During a crisis, right? If both parents die and there’s minor kids, it’s a crisis. And so you naming in your will that, I want Bob and Sally to be the guardian.
Then the family’s on notice. Hey, they probably wanted Bob and Sally to be guardian. We shouldn’t push too hard on this. So how do you choose a guardian? Who do you, how do you choose the right guardian for you? So you want to consider things like their values. Are they similar to yours? Are they good financially?
Do they have the ability to raise kids? Do they live in a location that is appropriate for raising kids? And also important and maybe most important, are they willing to take on the role of Guardian? So think about things like this, right? Does the Guardian that you’re thinking about match your parenting style?
Do they match your values? Are they financially stable? Can they afford it? The Jensen’s thought that their brother-in-law could afford it, but apparently he couldn’t. Right? And you wanna have a conversation with them. You wanna have a conversation with regards to, Hey, are you really up for this? I’ve [00:06:00] got these kids, I wanna make sure that they’re okay.
Are you up for it? And so that’s important. If they’re not up for it, then it’s a problem, right? So there’s such a thing as a temporary versus a permanent guardianship. Temporary guardianships will cover short term incapacity. They would also couldn’t take over like short term responsibility while a permanent guardian is being appointed.
These temporary guardianships last about 60 days where permanent guardianships last until they’re no longer necessary in the case of a minor’s until they’re 18. These permanent guardianships require court approval, and they do have ongoing oversight with the court. So you, give them a report every year to three years that says you know how the kids are doing.
You know, what are you doing for them? Are they thriving? Those kinds of things. And the courts, during those yearly or tri-annual reviews, evaluate their stability. You know, for the kids. They evaluate the guardian stability, they look at the kids’ safety. You know, make sure that things are going okay. Now, guardian is one thing, right?
Guardian is one thing, and [00:07:00] Guardian deals with taking care of the kid, right? Or being in charge of the kid’s personal life. That means going to doctors, dealing with schools, stuff like that. It doesn’t necessarily mean dealing with money. And there’s a conservatorship that can be used for money, but there’s also a role for trusts.
And if you’re going to see an estate planning attorney like you should, a trust would allow you to have much more control and the kids to be more protected in their future. So what is a trust? A trust basically manages and protects assets for children, in this case, under a certain age. Which can think fund things like education, healthcare, other needs, and they avoid things happening.
When a kid gets a big chunk of money, a trust allows for the controlled distribution of support over a long-term, you know, period of time. So the kid can go to college, they can pay for rent, they can maybe buy a house, have a car. A trust also protects assets from creditors. It protects assets from [00:08:00] poor financial decisions by young people.
don’t give your kids money too young. Kids are younger and younger these days. They’re younger and younger, right? When I was 25, I think I was a lot older than most 25 year olds are now. That’s just the way the world is now. That’s the way it’s been for a long time, I think. But don’t give your kids money at 18 just to let them do whatever they want with.
That could be a disaster. And in a trust that you create, you can tailor how you wanna support your kid, right? You can tailor it to specific goals, specific circumstances. You can incentivize education. You can incentivize work. And uh, make it so that the kids really can thrive under the structure. Now, during your lifetime, you can set up multiple types of trusts, and basically any trust that you’re going to create for your kids is going to be an irrevocable trust, okay?
And that irrevocable trust will provide long-term asset protection. It also can save taxes. And it can control distributions like we talked about before. If you create this trust within a framework of a revocable trust for you, if you’re [00:09:00] mom and dad, these revocable trusts can be maintained, you know, as is or they can be altered as needed, right?
As things change financially, as kids change financially. An irrevocable trust for the kids. The reason they’re irrevocable is because then they’re protected from creditors and they don’t have the ability to basically take over, you know, and change what mom and dad said. So when we’re setting up a trust, what do we think about it’s key decisions to setting up a trust of these, right?
Choosing a trustee who’s gonna be in charge? The trustee is the person that manages the trust. Who is that person? You wanna determine, you know, how you’re going to distribute to your kids. You can set, set certain ages for them. Like maybe I give them some money at 25, maybe I give ’em some at 30. Maybe I give ’em everything at 35.
And you can provide provisions, like I said, regarding college, medical expenses, all those kinds of things. When you’re selecting a trustee, and I’ve done a whole episode on this I don’t know what episode is. Go back and check. It’s maybe a year or so ago I did an episode on check choosing a trustee, which is very good.
But you wanna select a [00:10:00] trustee with financial acumen and impartiality to manage assets. You want to get someone that knows what they’re doing and they’re not going to blow the money. And they, another thing is that is good for this, is they don’t need the money. Okay? So they’re not gonna be tempted to take it from the kids.
Within this trust, you wanna specify distribution schedules. You wanna encourage responsible money management by your children. So a lot of trust that I draft have provisions that say, Hey, if you work we’ll match your income. Or if you go to college. Finish college, we’ll give you this bonus. Or if you buy a house, we’ll help you.
Or if you open a business, we’ll help you invest in a business so that you’re not promoting, you know, irresponsible behavior, but productive behavior. You can also include flexible provisions for things like unexpected healthcare decisions or, or expenses that are really helpful.
Now, another type of trust to consider too and, and if you have special needs children or children with disabilities, you want to use a trust called a special needs trust. Now, a special needs trust is a trust for [00:11:00] disabled children or children with special needs that is designed to allow them to have access to funds but not jeopardize their access to benefits like Medicaid or Social Security.
And so the reason that you don’t wanna put your kid in a jackpot where they’re, gonna lose benefits someday if they’re on benefits. So the Special Needs Trust basically deals with, you know, discretionary distributions that the trustee can make in a way that doesn’t disqualify them from being part of Medicaid or Social Security Disability.
They fund daily living. They can cover a therapy, they can cover education without disrupting benefits. In many cases, it’s positive to have a trustee that knows about public assistance programs. It’s not necessary. And usually they have a lawyer to help them like me. And these special needs trusts are all irrevocable, right?
They cannot be changed. So once you’ve set it and put money in it, those monies are there. Okay? Now, if you. Deal with trust for your kids. And when you pass away, if you pass away with minor [00:12:00] kids it’s ideal if you don’t have to go through probate so properly structured trust bypass Washington probate process for faster funds access and the wills guardian can be done a lot faster.
Right? So in order to create a trust like this or a trust created by a revocable trust. You wanna make sure that your assets are in the trust so that you avoid court delays. Your guardian will be, be appointed in your will. That reduces uncertainty with regards to care arrangements and the trust in itself.
And I’m talking for central plan for the mom and dad. Does save time, saves legal costs those kinds of things. So how do we avoid common mistakes with regard to our kids and trusts and guardianships? Well, First of all, failing to update guardianship designations is a problem. Choosing an unsuitable trustee can be a problem.
Not reviewing your plan can be a problem. So, outdated guardianship choices. I don’t know how many people I meet with. That have their old wills that say, Hey, uncle Bob’s the guardian, but now Uncle Bob’s 95 years old. That’s a [00:13:00] bad situation maybe, or a bad example because the kids are probably 50 or 60 you know, or 70.
But you wanna make sure that the guardian that you have in your will is the person that you want, that still is the person that you want, that still has the same values as you, and that’s still you know, able to do the job and willing to do the job. With regard to the money side of things, having trusts doesn’t work unless those trusts have money, right?
So the trusts need to be funded. Whether that’s with life insurance or when you pass away through your will or trust, they have to have funds or there’s nothing for the kids. And another issue that you need to consider, which we’ve talked about, is not naming an inexperienced trustee. Who’s gonna mismanage or delay your distributions to your kids?
So where do we go from here? If you don’t have a trust for your kids and you don’t have guardianship for your kids, what should you do? Well, you should go see an attorney, right? Make sure you’re working with an estate planning attorney to draft and update wills and trust. You wanna discuss these family [00:14:00] issues.
You wanna make sure that you’re legally compliant and the reason that you do this is so that you have peace of mind, right? Plan today. Peace of mind tomorrow. That’s what I say. You wanna make sure that you’re working with an attorney, though that’s familiar with the Washington Law. You don’t wanna work with a generalist.
You wanna work with a specialist or someone that focuses on, the trust or estate planning. Okay? You want to communicate your plans to the guardians that you have, right? You wanna make sure that they’re on board, that these people are still people that you want and you wanna make sure that you’re regularly reviewing things.
You wanna make sure that there’s no question as to what you want to have happen with these documents and with your kids, and that there’s still the way you want ’em, right? That Bob and Sally are still the ones that you wanna have in charge, right? And so that’s really it. Like it’s really important to make sure that you’ve got the plan in place.
To take care of your kids, right? And it’s easy to do. It’s easy to do, and it can be done in most cases with a simple will. If you don’t have a lot of assets, simple will, that creates a tri, a minor’s [00:15:00] trust for the kids. And that’s a night and day difference for the kids versus not having anything. So that’s why we’re talking about this today.
That’s why we had this episode. Don’t be like the Jensen’s kids. Okay? Don’t be like the Jensen’s. But that’s it for today’s episode. Stick around for next week’s episode, or come back for next week’s episode, which will be avoiding probate strategies that work. And we’ve talked a lot about probate.
It’s a good episode. It talks about basically things you could do to avoid it, make your life easier, or your kids’ life easier. But that’s the end of the episode. I’d like to thank you for listening to today’s episode of Legacy Talk. If you’d like today’s episode and would like to learn more, please like and subscribe for more great content.
I’ve been your host, James Jones, to your legacy.
Thank you for listening to the Legacy Talk podcast by attorney James A. Jones. If you found today’s episode helpful, we ask that you like and follow us on all major platforms so you don’t miss out on the latest episode. If you have questions for Attorney Jones, reach out at [00:16:00] info@joneslegacylaw.com or visit our website at jones legacy law com.
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