Case Study: Guardianship choices
Mom and Dad are recently divorced and have a Daughter, age 5, together. The custody arrangement is that Mom has primary custody during the week and Dad sees Daughter on the weekends. Mom is interested in putting together an estate plan, including naming a Guardian in the event that she were to die.
This is a common scenario these days. A guardian should always be named in an estate plan where an individual or a couple has minor children. But what happens when two people are divorced? Who should be named guardian then?
First, in the scenario above, if Mom were to pass away while Daughter was a minor, Dad would be the preferred choice of any court deciding a guardianship issue because he is the biological father. He will be the favored choice. But…Mom should still name someone in her estate plan to be guardian in the event that Dad is somehow unfit to be guardian if Mom was gone. Common examples of why he might be unfit would be substance abuse problems, incarceration and mental incapacity. So just in case, and most importantly, to give Mom peace of mind, she should name someone to serve as Guardian for daughter in the event Dad could not.
A good estate plan for Mom would then include a will (perhaps with a testamentary trust) and/or a living trust, including a guardianship designation, a healthcare power of attorney, a healthcare directive, a durable power of attorney for finance and some probate avoidance planning, either by completing beneficiary designation assets (referred to as nonprobate transfers), or in the case of a trust, by changing the titling of assets to reflect ownership by the trust.
With a will, a person can name a guardian for minor children, name someone as the executor of their estate (referred to as a “personal representative” in Missouri) and name who will inherit their estate. A will becomes effective after death. Prior to death, the executor has no powers to deal with the affairs of the person who drafted the will. Finally, a will does not avoid probate, but merely provides the probate court with a plan regarding the distribution of the decedent’s property and the payment of their debts. It’s up to the executor to “execute” the plan in the will.
When a person dies, their probate estate consists of all property that passes pursuant to the will and all property and cash assets owned at the time of death. This would include all accounts, personal property, vehicles, stocks / bonds, life insurance and retirement accounts. All property that has a joint tenant or which has a nonprobate transfer designation, such as a “POD” or “TOD” (Payable on Death or Transfer on Death) is not part of the probate estate.
As an example, if a married person died with a home owned jointly with their spouse, two jointly owned vehicles and a bank account in their name alone but naming the spouse as beneficiary under a POD designation, they would not have a probate estate. Under the same example, if one of the two vehicles was in their name along and there was no POD designation on the bank account, the probate estate would include the individually owned vehicle and the bank account.
Under Missouri law, a person creating a will has freedom to distribute their estate as they desire. One exception, however, is where the person is married. A surviving spouse can choose either to take by the terms of the will, or ask the probate court to award them 1/3 of the probate estate if the deceased has children or 1/2 of the estate if there are no children.