It is natural to expect you will be around to raise your children to adulthood, but you must prepare for the worst. If you and your spouse die while your children are still minors, you will need a conservator and guardian to take care of them. Whoever you choose to take care of the assets of your children will owe “fiduciary duties” to the children.
Being a fiduciary means a person manages financial matters on behalf of someone else. Conservators and trustees for minor children handle their assets since they are not old enough to do so. U.S. News and World Report explains how both guardians and trustees carry out these duties.
Fiduciary duties of conservators
A guardian takes care of an individual, generally an infirm person or a minor. Meanwhile, a conservators manages the person’s estate and finances. The duties of a conservator for a minor include the following:
- protecting the estate until the child reaches adulthood
- prudently investing the estate as a reasonable investor would under the circumstances
- maintaining loyalty to the child while administering the estate
- keeping records, including receipts
- reporting to the court when needed
A conservator could become legally liable for mismanaging the estate of the children. Mixing estate and personal assets could become grounds for removal by a court.
Fiduciary duties of trustees
If you create a trust to hold an inheritance for your children, you will also appoint a trustee to manage the trust. A trustee owes similar duties to your children as a conservator. However, the main fiduciary duty of a trustee is to manage the trust according to the wishes of the trust creator as outlined in the trust document. Your trustee may make purchases and payouts on behalf of your children but must follow the terms of the trust you have established.
Consider your options
Given that your conservator or trustee could run into legal trouble for mismanaging the assets of your children, you should pick someone who can handle financial matters and has the best interest of your children at heart. Establishing both a trust and a conservatorship is another option to help establish checks and balances. Estate planning has a variety of methods to help you guard the inheritance of your children.