How To Prepare a Will Part 4

In this video, We introduce you to some of the key concepts involved in a will. We describe some of the key roles involved, and the main decisions you will have to make.

Part 4 of a series on How to Prepare a Will.

Transcript

4. Key Roles and Decisions to Make in Your Will

In this video, We introduce you to some of the key concepts involved in a will. We describe some of the key roles involved, and the main decisions you will have to make.

1. Estate Trustee

You will have to decide who the estate trustee is. As we discussed in the previous video, this will be the person who, immediately following your death, takes charge of gathering your assets, pays off your debts and taxes, and implements the wishes in your will.

You want to trust this person to follow your wishes, and also be responsible in managing money. In most cases, this will be your spouse, but you will also name an alternative person if your spouse dies at the same time as you.

2. Caregiver of the Child

You need to decide who the primary caregiver of the child will be. This person is referred to as the “custodian”, or the one who will have custody of the child. This person will be responsible for making decisions about the child’s health, education and developmental needs. This will also be the person that your children live with should you die.

Naturally, this will be your spouse if you are still married and live together at the time you died. This would happen without a will. But if you and your spouse died at the same time, or you had sole custody of your children, then the person you name as custodian is important.

3. Guardian of the Child’s Property

If you have a simple will, and both you and your spouse die, then most, if not all, of your assets would flow to your children. As I’ve mentioned, however, children under 18 cannot legally control or own property, even assets that are in their name.

This is where the guardian comes in. The guardian would manage the assets on behalf of the children, and provide for the child’s needs with those assets while he or she is under 18. Once the child turns 18, the guardian’s duties would cease, and all the assets would go under the control of the child.

There may be some confusion about the difference between the custodian and guardian of the child’s property. They can be one and the same person, or they can be two different people. The custodian is the caregiver of the child – the one to make decisions for the child that the parent would normally make. The guardian manages the assets that are in the child’s name, and has the ability to use those assets on behalf of the child.

They can be one and the same, but there are occasions where two people might be better. For example, the grandmother might be the better caregiver, but not be as good at managing money as your brother or sister. In that scenario, they would work together for the well-being of the child.

4. The Child’s Trust and Trustee

In most of our will plans for young families, we include what is called a “trust plan”. And each trust plan has one or more trustees.

What is a trust?

A trust is a way to give someone money but maintain some control over how it is used and when it is given.

What happens is this: you give money (or assets) to a trustee, who will hold and use the money for the benefit of someone else in the way you decide. So in most cases, you would leave money in your will to the designated trustee – lets’ say your brother, Mark – who will use that money, and hold that money for the benefit of your children.

You will decide how that money is to be used. You can give your trustee discretion to use that money as they deem best, according to the circumstances, or you can determine more specifically how that money is to be used. For example, you can say that a certain percentage of the money – say 25% – or a specific amount – say $50,000 be used solely for post-secondary education.

You can also, within limits, determine when your children are to receive the assets outright.

The main advantage of setting of up a trust within the will is that you enable the assets to be used in productive ways, and for your children to receive them when they are ready, not as soon as they turn 18.

With a trust plan in place, the trustee can overlap the role of guardian, and essentially play the same role, or it can be someone apart from the guardian. Remember: the guardian’s role is to ensure that the child’s physical and material needs are properly provided for. It may seem similar to the trustee’s role, but in legal terms, the trustee’s role is to implement the terms in the trust that you have laid out. The role of trustee carries with it legal obligations to act in the best interests of the beneficiaries, or in this case, your children.

Differentiating these Roles

There is often some confusion about what the difference between these roles are.

To summarize: the custodian’s role is to make decisions with respect to the child’s health, education and other developmental needs. This person will be the one the child resides with. Think of a custodian as a surrogate parent. The guardian ensures that the child’s physical and material needs are met, and will manage the child’s assets to do so. If the guardian is different from the custodian, they will work closely together. The trustee is legally the owner of the assets and holds those assets for the benefit of the child. The trustee must comply with the terms of the trust that you set out.

So let’s put it this way: even if the guardian thinks that your child will need $10,000 to register for private skating lessons, if the trust says that the capital of the assets can’t be taken out, then the trustee must comply with that stipulation.

Sounding a little murky? That’s why at some point, it’s best to talk directly with a lawyer. Each situation will call for a different type of plan. The same person can comprise all of the roles discussed here, it can be different people for all roles, or it can be a combination.

The terms of the trust plan will depend on your particular wishes and circumstances as well. For example, some parents want to ensure that enough money is saved and used specifically for post-secondary education. Others want to give complete discretion to someone they trust to use the money according to the circumstances. This will be a personal conversation you have with your lawyer to tailor a plan that best meets your objectives.

These are the most important concepts and decisions in a will. But there are still other things to think about. Please join us in the next video where we’ll discuss some of those things.