Management for Property That Does Not Pass Under Your Will

The UTMA, child's trust, and pot trust are good management options for property that minor or young adult beneficiaries receive under your will. However, if you have minor children and they receive property of significant value outside of your will, a court will usually have to step in and appoint a guardian to manage the property under court supervision until the children turn 18.

The two most common ways that children receive property outside of a will are from life insurance or through a living trust. While it is possible to provide for management of this type of property through your life insurance agent under the UTMA or within the living trust itself, often no such management is established and a property guardianship is required.

In addition, property that your children receive from other sources— the lottery, a gift from an aunt or uncle or earnings from playing in a rock band—may also need to be managed by a property guardian.

It is always better to specify who will manage any such property that your minor children come to own. Otherwise, the court will appoint someone who may or may not have your children's best interests in mind.

Choosing a Property Guardian

When choosing a property guardian, name someone you trust, who is familiar with property management and who shares your attitudes and values about how the money should be spent.

You need not worry about finding a financial wizard to be your property guardian because that person will have the power to hire professionals to prepare accountings and tax returns and to give investment advice. Anyone hired for such help may be paid out of the property being managed. The main job is to manage the property honestly, make basic decisions about how to take care of the assets wisely and sensibly mete out the money to the beneficiary.

If you are using the child's trust, a pot trust, or the UTMA to provide management for property you are leaving to your children in your will, the person you have named as trustee or custodian would also be a good choice for property guardian. Another possible choice is the person you chose to be personal guardian, if you think he or she will handle the property wisely for the benefit of the minor (see below). You also may wish to choose someone else entirely.

Whomever you choose, it is essential to get his or her consent first. This will also give you a chance to discuss, in general terms, how you would like the property to be managed to be sure the manager you select agrees with your vision and fully understands the beneficiary's needs.

Finally, as a general rule, name a trusted adult who lives in or near to the state where the property will be managed—or is at least willing to travel there if needed.

Naming the Same Person to Be Personal Guardian and Property Guardian

It is usually preferable to combine the personal care and property management functions for a particular minor child in the hands of one person. Think first who is likely to be caring for the children if you die, and then consider whether that person is also a good choice for property manager.

If you believe that the person who will be caring for the minor is not the best person to handle the minor's finances, consider another adult who is capable and is willing to serve. If you must name two different people, try to choose people who get along well because they will have to work together.

For property you leave to young adults who are too old to have a personal guardian, select an honest person with business savvy to manage the property.

EXAMPLE: Orenthal and Ariadne agree that Ariadne's sister, Penny, should be guardian of their kids should they both die, but that the $200,000 worth of stock the three kids will inherit might better be handled by someone with more business experience and who will be better able to resist the children's urgings to spend the money frivolously. In each of their wills, they name Penny as personal guardian of the children, but also create trusts for the property they are leaving to their children. They name each other as trustees and Orenthal's mother, Phyllis, who has investment and business knowledge and lots of experience in handling headstrong adolescents, as the alternate trustee, after obtaining her consent. Orenthal and Ariadne also decide that one of their children, who is somewhat immature, should receive his share of the estate—at least the portion not already disbursed for his benefit by the trustee—upon turning 25, and the other two children should get their shares when they turn 21.

Naming the Other Parent

You may be surprised to learn that the child's other parent, even if you remain married to him or her, probably will not be able to step in automatically and handle property your children get in your will or through some other means such as life insurance.

Unless you provide for management in your will, that other parent usually will have to petition the court to be appointed as the property guardian and then handle the property under court supervision until the children turn 18. If you want your children's other parent to be the property guardian, you must name him or her to take the job. Of course, you may prefer for someone else to manage the property, and with rare exceptions, your choice will be honored.

Restrictions on Out-of-State Guardians

Some states put restrictions on guardians who live out-of-state. In most of these states, an out-of-state guardian must appoint an in-state agent to receive legal papers, which is not a great burden. But in Florida and Oklahoma, an out-of-state guardian must be a close relative of the child. And in New York, Iowa, and Tennessee out-of-state property guardians must have an in-state co-fiduciary. In these states, it may be better to name a guardian who lives in-state.

Explaining Your Decisions

If you want to explain the choices you make in your will, we suggest that you do so in a letter that you attach to the will rather than in the will itself. This avoids any chance that you will accidentally add confusing or conflicting language to your legal document. A letter to survivors is a good, informal way to share the thoughts and reasons behind your decisions. If you want to write one, at the end of the will interview we offer guidance and examples to help you along.