You Have Minor Children: What You Should Include in Your Estate Plan

You Have Minor Children: What You Should Include in Your Estate Plan Image

Everyone needs an estate plan for three basic reasons: (1) to manage incapacity, (2) for quick, cheap, and easy transfer of property at death, and (3) to protect assets for yourself and your beneficiaries. But parents of minor children also need an estate plan to answer other important questions: (4) who will raise your child if you die or become incapacitated, and (5) who will manage your child’s property you die or become incapacitated? The default answers to (4) and (5) might not be what you like. Your estate plan is the place to put your answers to these questions. The goals are to minimize court involvement, provide for your child, and protect your child’s assets, seamlessly.

          Who Will Raise Your Child if You Die?

          The surviving parent continues. 12 Del. C. § 3902(b). This can be an issue for divorced parents where the custodial parent would want a grandparent of the custodial parent to have a role in custody rather than the surviving parent have sole custody.

          In Delaware, if you are the surviving parent, the Court must appoint a guardian to raise your minor child following your death. This is called a guardian of the person (which differs from a guardian of the property, discussed later). But the Court will look at whom you nominated before your death. That’s why in our Young Family Plan (which is an estate plan for families with minor children) we include a document in which you nominate the guardian of the person and property of your child should both you and your child’s other parent die before the child reaches 18.

How do you nominate a guardian of the person? Remember, the process is you nominate the guardian, but the Court appoints the guardian. The proposed guardian must file a petition with the Court after the surviving parent dies. The Court will appoint the nominated Guardian unless there is just cause to the contrary. 12 Del. C. § 3902(b). A child age 14 or older resident in the State of Delaware may be able to choose his/her own guardian if the Court finds just cause against the nominated guardian. 12 Del. C. § 3902(c).

What happens if you do not nominate a guardian of the person? The Court appoints someone according to its discretion. 12 Del. C. § 3902(d). That takes control out of your hands and puts it solely in the Court’s hands. Further, if your child is age 14 or older and resident of the State of Delaware, your child may choose and the Court shall appoint that person absent just cause to the contrary. Yes, you read that correctly. If your child is 14 and you as surviving parent have nominated no one as guardian of the person, your child age 14 may choose the guardian and the Court will honor that choice absent just cause otherwise. 12 Del. C. § 3902(d).

          What if You Don’t Die, But Become Incapacitated– Who Will Raise Your Child Temporarily?

          It works about the same way: as surviving parent you can nominate someone ahead of time, and if the time comes, the Court considers your nomination and appoints your nominee absent just cause not to, for absences or incapacity. 12 Del. C. Ch. 39.

          Now Let’s Discuss Your Child’s Inheritance - call it Property. Who Will Manage Your Child’s Property if You Die or Become Incapacitated?

          By law, minors cannot own property or hold title. If a parent dies, and the minor child is to receive money, the law imposes a guardianship over the inheritance until the child turns 18. 12 Del. C. § 3901(a).

          This results in at least 3 challenges:

  1. A surviving parent would the parent-guardian of the child (meaning raise the child), but the Court might appoint someone else as guardian of the property (meaning handle the minor’s inheritance). The surviving parent becomes dependent upon another party to access money to care for the child.
  2. Annual accountings must be filed with the Court. This means even if the surviving parent is appointed guardian of the property, he/she must still account to the Court on how the money was spent. This reduces family flexibility and adds to the cost of administration.
  3. The Court’s jurisdiction ends when the child turns 18. Is an 18-year old sufficiently mature to receive a significant inheritance? A Revocable Living Trust is a better option, discussed at the end of this article, to protect and preserve for the child the assets that his/her parents worked so hard to earn.

          As a surviving parent, you can nominate a guardian of the property just as you can nominate a guardian of the person. It’s just that Court rules for guardians of property are complex in terms of monetary thresholds, what accounts the funds must be kept in, basically the financial powers and duties of the guardian. For example:

  1. The Court of Chancery of the State of Delaware appoints the guardian of the property.
  2. There are two kinds of guardian of the property. One is a “limited guardian” of the property, which is for a specific task, such as receiving life insurance proceeds or selling real estate. The other is a “plenary guardian,” which is for broader powers defined by Court order.

Limited Guardian of the Property

A limited guardian is necessary when the amount received is $25,000 or more. 12 Del. C. § 3901(l), Court of Chancery Rule 180(a). Nonetheless, insurance companies and situations may require it even if the amount is less than $25,000. Court of Chancery Rule 180(b)(2). Examples: An insurance company may require a guardian before it will release funds; property (stocks and bonds) left to the minor may need to be sold; real estate left to the minor may need to be sold.

The limited guardian acts only for a specified time. The guardianship terminates when the limited guardian files proof with the Court that the limited guardian has performed his/her duties under the Court’s order. Typically, this would mean that a limited guardian is appointed to take possession of the funds or property and secure them in an appropriate account, or take possession of property and complete sale of the property. Once the guardian files proof that those tasks are completed, the guardianship terminates and the case is closed. Court of Chancery Rule 180(b).

Pursuant to 12 Del. C. § 3951 and Chancery Rule 113, Court of Chancery approval is required any time a guardian wishes to sell real estate that is titled in the name of a minor. There are three (3) steps the guardian must take in order to sell real estate.

Step 1: Motion to Appoint Appraiser

Step 2: Petition to Sell Real Estate

Step 3: Return of Sale

Plenary Guardian

          A plenary, or unrestricted, guardianship is one that lasts until the minor turns 18 years old. 12 Del. C. §§ 3901(e), 3909(a); Court of Chancery Rule 180-C(c). Until the guardianship terminates, the funds must be held in a specially-titled guardianship account. Court of Chancery Rule 180(c).

Under a plenary guardianship, the Court of Chancery:

  1. Will monitor the account,
  2. Will require the guardian to file annual bank statements,
  3. May require the guardian to file an accounting, and
  4. Will restrict the account so that the funds cannot be spent except with a Court order.

There also are restrictions regarding the bank where a guardianship account may be opened. A petitioner must have “good cause” to file for plenary guardianship rather than limited guardianship. A Petition to Expend must be filed to spend money. Court of Chancery Rule 180(c).

How Can You Avoid Headaches For Your Child To Receive An Inheritance?

          Answer: Use a Trust!

          Parents can create a Revocable Living Trust that holds the property of the minor,


Select a trustee they know and trust, including the surviving spouse, to manage the funds, which trusteeship can continue past the child turning 18.

The Revocable Living Trust may also include distribution standards and allow the child to become his/her own trustee or a co-trustee at a certain age.

          It is true a Testamentary Trust may be included in a Will instead of creating a Revocable Living Trust. A Testamentary Trust in a Will:

  1. Is a cheaper estate plan to create;
  2. But does not avoid probate;
  3. Does not help with incapacity management; and
  4. Is a less appropriate vehicle for comprehensive instructions than a Revocable Living Trust.

A Revocable Living Trust:

  1. May cost more to put in place;
  2. But avoids probate;
  3. And helps to manage incapacity; and
  4. Is the appropriate vehicle for comprehensive instructions.

We understand all of this, and more, about minors, including topics that exceed the scope of this article, such as minors as beneficiaries of 401ks/IRAs, disabled minors who receive public benefits or may need to do so in the future, and so on.

Our Young Family Plan includes:

  1. Last Will and Testament –Leaves assets to beneficiaries after parent death.
  2. Nomination of Guardian – Nominates temporary and permanent guardian(s) to care for minor children if parents are away, disabled, or deceased.
  3. Testamentary Trust for Children – Appoints trustee to manage funds for minor children if parents die. Included in Last Will and Testament.
  4. Revocable Living Trust – Allows for easy transition of control when parent dies or becomes incapacitated. Appoints trustee to manage funds including for minor children. Avoids probate after parent death.
  5. Supplemental Needs Plan – Included in Revocable Living Trust and Last Will and Testament. Protects benefits disabled child may be receiving.
  6. One Deed – Retitles home in name of Revocable Living Trust. 
  7. Durable Power of Attorney – Designates agent to make financial decisions for parent if parent unable to do so while alive.
  8. Advance Health Care Directive – Designates agent to make health care decisions for parent if parent unable to do so while alive.
  9. HIPAA Designation – Authorizes release of information to designated agent.

Call or email us today to schedule your Young Family Plan consultation and design.

Author: Catherine B. Read, Esquire