Write Will, Name Guardian for Your Kids Now

HUNT VALLEY, Md. (TheStreet) -- Ask a score of financial planners the most important financial planning recommendation for young parents and probably 19 of them would mention something about investing, retirement planning, insurance, education planning or tax planning. The most important financial planning recommendation for young parents isn't completed by a financial planner, though, but by an attorney.

If you're a parent with minor children, the most important planning strategy is to have a will written and a guardian set up in it. The guardian is the person charged with day-to-day care of your children, effectively becoming their new parent. If you fail to designate who does it, officials in your home state will decide for you. Do you trust them to make the right decision?

If you're a parent with minor children, the most important planning strategy is to write a will and name a guardian to take over in case you die.

There are at least two other officers you should appoint in your will: the personal representative (also known as executor) and trustee. The personal representative has the relatively short-term job of walking your estate through the probate process. You want to choose -- for lack of a better term -- an anal-retentive person who will follow the steps necessary to complete the detailed checklist to close your estate.

The trustee is the designee second in importance only to the guardian. While the guardian is responsible for raising your children, the trustee is responsible for funding their upbringing. Don't mistake the need for a trustee in your will as an optional estate planning feature reserved solely for the silver spoon crowd; the vast majority of youngish households should serious consider the creation of a trust in their will and a trustee to manage it. I'm not talking about a "trust fund" here but a testamentary trust, a vehicle not birthed until you and your spouse are no more.

While the testamentary trust may not exist until you don't, you write the rules for it in your will. It is likely to be the bulk of your estate -- your home and life insurance proceeds -- and, since most families with a proper level of life insurance will have a testamentary trust with more than a million dollars in it, it is important to deliberate over the instructions you give for its use. Many wisely give the trustee broad "HEMS" provisions, allowing for distributions supporting health, education, maintenance and support. Consider also scheduling principal distributions over several years -- for example, you may distribute one-third of the principal when your children reach age 25, half at age 30 and the remainder at age 35. You're protecting the money both for and from the child. After all, what would you have done with a million bucks at the age of 21?

A logical question many pose is, "Shouldn't I just name one person for the personal representative, guardian and trustee?" I'm not an attorney and don't wish to be misconstrued as one offering "legal advice" (an offense punishable by law); my preference, though, is to see the person best suited for each office named. For most of us, it is not one person who is best at each of the important designations in your will. Is the person you trust most to actually raise your children also the most financial savvy and detail oriented? Even if the answer is yes, you may still consider the benefit of having a healthy wall of separation between the guardian and the giant bucket of money in the testamentary trust created under your will.

It's not that investing, insuring, education planning, retirement planning and tax planning aren't important -- in fact, they have the highest probability of affecting your life and the lives of your family members, while the guardianship and trustee provisions in your will are unlikely ever to be exercised. But in the unlikely case you and your partner die in an untimely fashion, you'll make that transition much more peacefully knowing someone you trust is designated to care for your offspring and their financial well-being.

More succinctly, you can't write a will after you're dead.

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Timothy Maurer, CFP, is vice president of Financial Consulate, based in Hunt Valley, Md., and a member of NAPFA, the National Association of Personal Financial Advisors. He can also be found at TimMaurer.com.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.