Don’t Leave It To Chance

Ward and June Cleaver always took pride in being good parents. They were involved in their kids’ lives, taught them the things they should know, applied appropriate discipline when necessary, and created a great environment in which to grow up. Wally and Beaver had a good life, and they knew it.

The Cleavers were comfortable, but they never considered themselves rich. They owned a home with some equity and had a little money in the bank. Ward had a modest life insurance policy through work, and both spouses purchased additional policies from their local agent, but none of the policies had any current cash value, only a death benefit. Considering their financial position, they didn’t see any reason why they might need a trust. They had always thought trusts are for rich people

They started reconsidering their position on the issue, however, when a close family friend barely averted death in a bad car accident. Thankfully everything turned out fine for their friend. Things always seemed to turn out fine in the end for the Cleavers and everyone they knew.

But this friend put an idea in June’s head when he commented to her about how thankful he was that his affairs were all in order. She questioned what he meant – she thought having your “affairs in order” was something only “old” people worried about, and she and Ward certainly didn’t consider themselves “old.” He convinced June to go see his Elder Law attorney to find out what he meant, and June convinced Ward to go with her.

The Cleavers learned that there were two major questions that they had not answered – at least not legally answered – when it came to their children. First, the lawyer explained that “having your affairs in order” for a parent means legally designating someone as guardian for your children if you are no longer able to care for those children because of disability or death. Many new parents think about and discuss who would take the kids if the unthinkable were to happen, but most do not take the time to put their wishes in writing to avoid dispute and confusion at what would certainly be a very difficult time.

Second, the lawyer explained that “having your affairs in order” for a parent means legally designating someone as trustee over the estate your children will inherit. Ward and June had never taken the time to really calculate how much they would actually leave the kids if they died at the same time. Between the equity in the home, the proceeds of three life insurance policies, and the money they had set back in the bank, they were going to pass on more than they previously realized.

Ward asked the lawyer what would happen with the home and the life insurance policies if the children were still minors when he and June died. The lawyer explained that the life insurance company could not turn over the proceeds of the life insurance policies directly to minors, and the kids would not be able to do anything to sell the home. Instead, the home would wind up in probate.

The lawyer had the Cleavers’ attention. They were ready to get their affairs in order. First, the lawyer recommended that the Cleavers execute a Revocable Living Trust. The trust would be funded by retitling their home into the name of the trust (keeping it out of probate) and by naming the trust as the death beneficiary on their life insurance policies (giving the life insurance company a legal entity, not a minor, to which to pay the proceeds at death).

The Cleavers would need to nominate a trusted individual as trustee of the trust. This person would hold and manage the trust funds for the benefit of Wally and Beaver until the children were old enough to manage the funds themselves. This trustee could spend money on the children according to the direction given by the Cleavers in the trust document.

Second, the Cleavers would need to execute a Last Will and Testament naming a guardian over their minor children. While the trustee would manage the children’s financial affairs, the guardian would look out for the children’s wellbeing and their personal affairs. Some people will name the same person as both guardian and trustee for convenience, while others name different people for added protection. The guardianship would almost always end when the child reaches the age of eighteen, but the trust can continue on until the children reach an age at which the Cleavers are more comfortable turning over control of the funds directly to the children.

This plan was a missing piece to the happy life Ward and June had created for Wally and Beaver, and while they hoped they would never need it, they were relieved to have their affairs in order.