Parents need to have a guardian in place

September 12, 2014

Financial planning is a great business. You get to help clients save tax dollars, create efficient investment portfolios, and help protect them from the risks of life. These are but tools of the trade. The real work, and the joy that comes from it, is helping people pursue their goals. A basic human goal is to protect loved ones. This is why the toughest, yet necessary, question in financial planning is, “Who is going to raise your children if you die?” What follows is what not to do.

In a previous column, I wrote about a situation that happened in my family in 2000. I dusted it off and updated it, but the message is still the same. My beautiful first cousin was married to a successful entrepreneur who had a scuba diving business in Florida. After spending many years in the sunny climes, they decided to move their residence to a western state. It’s amazing that in today’s world of computers, faxes, and palm pilots one can run a business from the other side of the country, but you can and they did.

One of the reasons they decided to relocate was that they loved to ski. The couple went skiing when they should not have: an avalanche alert had been posted. Consequently, they were killed in an avalanche. Their bodies were discovered by a search prompted when no one showed up to pick up their three-year-old son from his Montessori school.

The tragedy gets worse. My cousin and her husband had not updated their wills to name a guardian for their son in the event something happened to them.

The answer to the toughest question in financial planning, “Who is going to raise your children if you die?” is answered in a will. If you have minor children, your will should name a guardian and a successor guardian if the primary can’t or won’t serve. This guardian should be carefully selected because they will be the one to raise your children! Choose someone who is not much older than you (it’s not fair to ask your parents), someone with similar values, philosophies and, if it’s important to you, religion.

Also, make sure that, along with your children, you provide their guardian with the money that they will need to raise your children. If you don’t have it now, buy some life insurance. Now this guardian may be a wonderful person, someone you trust implicitly to raise your children but they may be (to be politically correct) “challenged” when it comes to financial acumen. This is not the end of the world because you can name someone else to handle the money. One party, the one with a heart, is chosen to make the right decisions for your children. Another party, the one with a good financial head, is named as a co-trustee of the trust set up by your will for the benefit of your children. This system solves the problem of finding a heart and a head residing in the same body.

Because my cousin and her husband had no guardianship provisions in their wills, there was a lengthy and costly custody battle between two families much like two parents battling through the legal system to gain custody of their own child.

After a few hundred thousand dollars and hundreds of hours of travel time across the country, the judge made a decision concerning the guardianship of my cousin’s child. Her husband’s family was given custody of the child and control of the money, which was substantial. My family got occasional visitation.

Don’t let this happen to you or to anyone whom you care about. It is critical that you set up a will naming a guardian and a successor guardian. Also, be sure to provide funding for your children’s upbringing and education should anything happen to both you and your spouse. As mentioned above, you can do this by purchasing life insurance.

If you have children, you owe it to them.

Content in this material is for general information and not intended to provide specific legal advice or recommendations for any individual. We suggest that you discuss your specific situation with a qualified legal advisor.

Randy Neumann, CFP® is a registered representative with and securities offered through LPL Financial. Member FINRA/SIPC. Financial planning offered through Randy Neumann Wealth Management, a Registered Investment Advisor and a separate entity.

He can be reached at 600 East Crescent Avenue, Suite 104, Upper Saddle River, NJ 07458, 201-291-9000.