If you’re making an estate plan as a relatively young parent, you may be interested in setting up a guardianship for your child. You know that you could pass away unexpectedly, but your child needs care and assistance, at least until they are 18. By choosing a guardian, you get to decide in advance who you want to step into this parental role.
When choosing a guardian, however, one thing to consider is if they’re financially able to take care of your child. This is no small request. It’s often best if the guardian is a close friend or family member, and you certainly want to choose someone who is willing. But many people may be willing to take on this role without having the financial means to do so. After all, recent studies claim that it costs $332,000 to raise a child until they turn 18.
Setting up a trust
One potential way around this is to use your estate plan to create a trust. You can then fund the trust with your own assets. You could choose the guardian as the trustee, or you could choose another individual if you would like. They can work with the guardian to make distributions when necessary.
But regardless of the specifics of how you set it up, the goal is to provide the financial means to raise your child. You’re trying to remove any stress from the guardian and allow them to focus on the relationship. You do this by putting your own financial assets in the trust in advance or using a life insurance policy that pays out into that trust.
Estate planning can be complicated, but there are many tools you can use. Be sure you know what legal steps to take.