Providing for Minors in Your Estate Planning Documents

Providing for one’s minor children is one of the most important goals and purposes of estate planning. For many individuals, starting a family is the motivation for considering how to handle and distribute assets in the future. Parents often consider two issues when planning the care of their children: who will obtain physical custody or guardianship of their children and how will their children be financially supported throughout their lives? Ideally, both matters should be specified in your estate planning documents.

For parents, a will is a vital document in establishing future guardianship for their children in the event that both parents die simultaneously. Parents may nominate a single legal guardian to care for their children and to manage their children’s assets until they reach the age of 18 years old. A child who is a minor under the law (less than 18 years of age) is not regarded as legally competent to care for himself or handle his own assets without adult guardianship. The nomination of a guardian is not only legally practical, but also prevents any conflict and speculation by relatives regarding the parents’ wishes if both parents are deceased.  

The second aspect of planning for the care of minor children entails directing the distribution of assets to financially support them. Although the same person may be responsible for both the physical custody and financial management of the minors, this need not be the case where different individuals may be better suited for each task. The parents may create a trust for their minor children. In a trust, a trustee is appointed to oversee and distribute assets to the minor children. The trustee is obligated to use his discretion to make prudent decisions regarding the distribution of assets. The trust may require the trustee to exercise his judgment in distributing the trust to pay for “reasonable” expenses relating to the care of the children and to make payments at specified times, or more frequently if the need arises. The use of a trust for younger children allows parents to control the distribution of their assets. Without a trust, the assets held by the guardian would become the property of the children after they reach the age of 18.

Alternatively, parents may establish a custodian account to be held until the child reaches the age of 18, 21 or 25 pursuant to the California Uniform Transfers to Minor Act (CUTMA). Under CUTMA, property is transferred to an adult custodian who manages the property for the minor, or the beneficiary, until the minor reaches a specified age.   

Best Practices

for Choosing a

Board of Directors

Choosing an experienced, engaged and capable board of directors is critical to the long term success of a corporation. The board plays an extensive role in guiding and advising the corporation on a range of matters, in addition to acting as the final decision maker for a variety of corporate matters. Given the vital role of the board, corporations should devote considerable time and resources to choosing a board and implementing strategies to help the board operate efficiently and prudently.  

The first and most important task for a corporation is determining the composition of the board. Ideally, board members should have a thorough understanding of the business of the corporation, the general industry in which the business operates, and the financial aspects of corporate management. Former CEOs and managers are often good candidates to fill this role. In addition, individuals with specific knowledge or skill sets may be selected where experience in a certain area is considered important for the governance of the corporation. In some situations, boards nominate individuals who are well connected in particular industries in order to promote the interests of the corporation.

In addition to choosing certain profiles for individual board members, corporations should think about creating a balance between independent, unaffiliated individuals and “insiders.” An insider might be a director or officer of the company, or any person who owns some percentage of the shares of the corporation. If both investors and outside individuals are not present on the board, then there is a risk that the interests of the corporation as a whole would not be fully represented. At the same time, boards can be best served by being comprised of a majority of independent outsiders to promote objectivity in the decision making process. It is generally a good idea to have an odd number of board members to prevent potential deadlock during board votes.

To enable the board to carry out its role, the corporation should draft and maintain bylaws that clearly establish the responsibilities of the board and the matters upon which the board has decisive and final authority. The bylaws typically provide term limits for each of the members, which helps ensure the inclusion of new perspectives and precludes any single individual from becoming entrenched for an extended period of time.