Tara (00:51):
Welcome everybody to episode 34. This is Tara, and today I want to talk to you about what could potentially be one of the hardest decisions that some clients have to make in their estate plan.
(01:06):
And that is the decision of choosing guardians for their minor children. And I have to admit, actually this was one of the hardest decisions I personally had to make when choosing guardians under my estate plan. And it made my husband and I drag our feet a little bit on updating our wills when we were expecting our second child. So even people who are dealing with this all day every day struggle with how to apply and make a choice because we're not really talking about legal principles here. What we're talking about is matters of the heart and family dynamics and also having to confront for what most people and for me is our greatest fear, the risk of us not being here and not being able to care for our little ones and witness them growing up and thinking about whose custody we are going to put them in to shepherd them through such an important phase of their life.
(02:14):
When you think about it, it's such an enormous decision. So I feel like this aspect of the estate plan, of course I'll just mention for some clients it's not at all relevant if you don't have minor children, it's not even something I have to think about. But for clients who do have minor children, this is a real double-edged sword. And I say that from the lawyer's perspective because firstly, I think it's something that we can use in our marketing strategy and our communication strategy with clients to really motivate them to take action. Now, I've written in my notes leverage this and which sounds really harsh and cruel and careless, but what I actually mean is these clients need to have a plan. We can't leave our families in our mess. And especially when you owe a responsibility and duty to young children to have a plan, an emergency plan where everyone knows their role and what to do in the event it happens.
(03:23):
So leveraging it in a sense does sound a bit cruel, but what I really mean is maybe we can tap into this part of estate planning to be the thing that really resonates with a prospective client. And if we're talking about choosing guardians or the importance of having an estate plan for our minor children, then this is the kind of thing that we can focus on and it might really be the main difference that motivates a potential client to actually go ahead and get their estate planning done. So yeah, I'm not trying to say that we take advantage of such a heart wrenching decision, but if we can focus on this for a particular demographic of client, it is going to be the thing that finally takes them from thinking, oh, I should get around to that someday to I'm going to take action on this today because I can't wait a minute longer with us not having a plan for our family.
(04:34):
When I say it's a double-edged sword, I also mean that as practitioners we might find that it creates delays and complexity in the estate planning process. And particularly if you've got a young couple with minor children who are dragging their heels and not making a decision or not wanting to sign their wills or do something like that, it could be because they're feeling doubt or uncertainty around something to do with the guardians and the plans with the kids and they can't necessarily put their finger on it or they just don't have total confidence that this is going to be the right plan or they're really struggling with choosing who to appoint. And I think that's a really common issue and I personally experienced it, really struggled with who to appoint as guardians, not wanting to offend people. And I'll share my personal circumstances. When I was living on the Gold Coast with my husband and we had our eldest son, my husband's parents lived really closely to us on the Gold Coast and they had my son visiting most days of the week, at least three or four days they'd pick him up from daycare for us, they'd have him on the weekend.
(06:00):
They were really involved in our lives and it was actually beautiful. As a side note, my eldest son was born right before Covid. We came home from the hospital and I was like on my phone, I'd been in my birth bubble and I was looking at my phone going, what is this covid thing? Is that something I need to think about? And I just didn't give it another thought. And then a week later we went into lockdown and that was, I had to look a one week old baby. And my husband's dad, my father-in-law stopped working. He was an architect at a university and he was made redundant and how universities suffered during that time and it was very unexpected and my father-in-law and my son just had the most beautiful bond because my father-in-law really stepped up to help take care of him. And it started out when my son was really tiny, he'd just take him for walks in the pram or the carrier, but as he got older he would look after him and that would never have happened, but for Covid.
(07:09):
So that's one silver lining. And I just say all of that to show you how close we were and my son was to my in-laws and the obvious choice was that they would be the guardians under our estate plan, and that's what we had in one version of our wills. And we also both loved living on the Gold Coast. My husband was born and bred there, and we really wanted our son to continue having that lifestyle if you know the Gold Coast has a certain lifestyle, but to our surprise, about two and a half years after my son was born, we moved to my hometown of Bundaberg and we were expecting our second son and life had just changed and the pace of everything had changed for us. And so we went for a sea change from one sea to another sea, I guess, or the same sea, but different beaches.
(08:09):
We went for a sea change to Bundaberg and so we didn't think it made sense to keep our in-laws as guardians for our sons, especially our youngest son who didn't have quite the same close relationship growing up five hours away. And we were building our life here and our eldest son now is in prep and he goes to school here and we really, really struggled to know what to do in terms of appointing our guardians, but for proximity, we would've probably appointed my in-laws and kept them. I feel like they would have a huge emotional impact on them to think that they were no longer going to be our back guardians for our children if something happened to us both. And then understanding who was right in our Bundaberg community was also really challenging, thinking about the age of my parents and everything that my siblings have got going on in their crazy lives and who can accommodate two more children and all of that.
(09:15):
So we really struggled. There was no obvious choice. I actually have to give a huge shout out to one of the lawyers in our community, Lucy Percy of Head and Heart Estate Planning because she has a free online course on her website about choosing guardians, which is a resource that she has created for her clients and prospective clients, which I just think is absolutely incredible. And I took her online course, I actually made my husband listen to it. We were driving from the Gold Coast to Bundaberg and it was like a five and a half hour drive the course I believe. I think it's only 20 minutes of listening time. So we didn't need the whole drive, but I had a captive audience, so I bought it on the car and we went through it and yeah, we did the exercises and from memory, I think the exercise Lucy guided us to do was we each had to write down what we wanted in the value systems and the criteria or characteristics that we thought were important in the guardians for our children.
(10:28):
And then also we each independently had to write down our own list of people in our community who we thought were going to be the right fit and then come together and see what other commonalities. So we went through that exercise, it took a bit of discipline, but we found a plan that we think will work for our family, and we got over the hump and we updated our wills before our second son was born, thankfully, and yeah, we got it done. But for someone who talks about dying and estate planning all day even, I struggled with this. So you can absolutely understand why it's hard for people to think about and it's hard for people to make a decision. So I want to talk a little bit about my thoughts on the right skillset for guardians because I think people can get a little bit lost, especially a lay person who has never had to do an estate plan or has very rarely had to do an estate plan.
(11:32):
So firstly I'll say I think we have to factor in the interaction of the guardian with the financial control roles, but I don't think that should be the main priority in my opinion. I really think the main skills or characteristics that we want to find in our is firstly someone who we know, who we trust implicitly will act in the best interests of the children. I think that's got to be the number one that you know they will love them almost as much as you and really have their best interests at heart. And I feel like if you can appoint people who have that, then everything else can be worked out. Maybe those people also have a bit of financial sophistication and will be able to manage the money, but they don't have to. You can appoint different people as the financial controllers of the inheritance to work with the guardians because I think as long as they can work together and have a solid working relationship, I really think that we can't expect just one person to have all of those skills.
(12:51):
So as long as we know that the children are in a home that is safe, that is happy where they are loved and taken care of, and not only are there essential needs met, but above and beyond that to help them flourish from childhood to adulthood, then I think if you've got people on the side managing the finances, providing an allowance and paying for whatever the children need through the guardian, then I think that will work fine. Having that interaction, I wouldn't appoint someone who was a great financial controller, but maybe not ready to be a guardian of a child to just be the guardian. I really think the financial acumen needs to take a backseat on that front though. One thing that I think really goes hand in hand, and I will actually do another episode on this about insurance, is the importance of making sure there is enough money for the guardians who are taking care of the children.
(14:02):
So I really, obviously asking your loved ones to take in your children is a huge honour, but it's a huge responsibility and it's going to change the guardian's lives drastically. One way to really help with that change is to make sure that there's enough money if you can have life insurance in place so that there is just a big whack of cash when you are young if you don't have preexisting health conditions. I mean, I'm not a financial advisor, so obviously I'm simplifying this, but getting life insurance that pays out when you die is not that expensive, especially if it can be through your superannuation. You may not even notice the impact in your weekly budget, but it can just make all the difference to say, okay, we've got a million dollars or $2 million to play with here so we have enough money to upgrade the car because now you need a Togo minivan or a big seven seat SUV or something to fit in the extra kids and all their bags and bikes and scooters and everything.
(15:22):
Maybe you need to upgrade your home or put an extension in so that there's room for the children to live. All of these things, yes, it's not a direct benefit for the children, but it is going to make their daily life and the adjustment of life without you so much smoother and easier for everybody. If your guardians have to get a second job to suddenly feed two more children, what is the impact going to be on that adjustment in the family dynamic and children who have lost their parents who then don't even have a guardian around all the time because they're too busy working, it's not an ideal scenario. So I really think it's important to think about what funding do we need to help our guardians accommodate taking in the children and accepting the role? And that's where I think it's actually beneficial even to have separate people in charge of the finances versus the guardians because you can bring a bit of check and balance into, okay, you need to upgrade the car.
(16:32):
Is this a reasonable upgrade or are we going luxury and blowing the children's inheritance on something that is really a personal need? How are we going to manage improvements to the Guardian's house? Are we just going to do an interest free loan or if they ever sell or are we happy to gift it to them as remuneration and consideration for the huge role that they're taking on? I think that flows really nicely into the power of a letter of wishes. So if you've listened to this podcast before, you probably have heard us mentioned the letter of wishes, which is a morally binding letter that accompanies the will. So it's not enforceable in court, but it can be a really powerful document to sort of speak from the grave and to let everybody know what you are thinking because obviously when guardians and financial controllers step into these roles, they're bringing their own value systems to make judgements and their relationship with you as a testator to try and think about what is the right in the circumstances, and maybe they don't always see eye to eye where we've got multiple people who have to make this choice.
(17:57):
So having written guidance from you to guide them on what you think should happen, your ideal plan can really eliminate some white noise conflict intention from the people in charge having to make decisions. So yeah, I think it's important there for you to say, what do you expect to happen with the guardians and knowing the guardian's current living situation, are you happy for them to move into your home? Are you happy for your home to be sold so that they can fund improvements to their home? All of these types of decisions, holidays, travel, I think we've got an hour letter of wishes, and this was inspired by the guidance from Lucy, is we want to make sure that there's a budget in our testamentary trusts to pay for regular travel for our children to go to the Gold Coast to stay with their grandparents down there, and then also to fund accommodation and travel costs for the grandparents from the Gold Coast to come up to Bundaberg where the children are so that they can maintain that relationship and that costs and finances is not going to be an impediment to that and maybe people will take advantage of it, but the relationship between our children and those grandparents is of the utmost importance.
(19:29):
So we would obviously all the other money stuff becomes secondary. I will also say it's really hard being a parent, and if you ever go on a community Facebook forum or social media or even just at a mom's group, you'll know that there is such a vast difference of the way that people think about raising their children. And that even happens, of course, between close friends and family members. So one thing that I think is really important and can help people is using that letter of wishes to write down how they want their children to be raised and anticipating all the decisions that will come up throughout the childhood of those children and how they would like the decisions to be made. So in my letter of wishes, we've got guidance about the schooling and the schools that we want them to go to and is it a private school or a public school?
(20:35):
And if it's a private school, making sure that the fees are paid and that is an important expense that we expect to be covered for the children. Some people know some of my good friends who their children might have particular health concerns or they're on various protocols because of different health conditions. They've got that really written down and prescribed, and they've chosen and built a medical or allied health support team around the family that they've got all their details written down and that they want them to continue working with those professionals. Sport is so important to my husband and particularly more than me, so it's one of his passions. And so in our family, we prioritise enrolling the kids in different, any sport that they want to try and giving them all the gear and the enrollment fees and all of that. So that's something that we've written down to say that we really want that to be priority, whether it's music or other cultural endeavours, just that their money should be available to support the children with the expression and curiosity of those interests.
(21:54):
Things about, and maybe I'm showing my age here, but yeah, when it comes to buying a first car and getting their driver's licence, assuming, I don't know, in 15, 12 years, people will even get cars or maybe we'll all have self-driving cars, I don't know by then, but can we release money from the inheritance to buy a car and is it a brand new car? Is it a secondhand car, or do they need to go and get a job at McDonald's and save up and learn the value of money? What's the value choice there? What about buying their first property or home and can we release funds for a deposit? Can we actually buy an entire property debt-free for them through the inheritance? How do we want to teach them the value of money? Are we happy for them to be trust fund babies or do we want them to work it out the hard way?
(22:55):
Everyone will have a different opinion on things like that. And the letter of wishes is a really nice place to write it. I actually updated my letter of wishes yesterday, which is crazy because I feel like I only updated it a year ago. And the amount of things in our life that changed in that space of a year, which when you look back, it's not big changes, but when it comes to someone getting across our life and understanding how things are working on a daily basis, and then also we'd changed accountants and financial advisors as well. Understanding all of that, there actually were some pretty major changes. And all I did was make the changes, get my husband to check if he wanted to add any others, and he was happy with my changes, and then we just printed it out, signed it, and we'll put it with the original will.
(23:51):
So the beauty of the letter of wishes is you don't need special witnesses, you don't need extra legal advice. You can really keep all of these decisions, this information, everything can be kept current so easily without the extensive full legal process for updating your will. And I think that's important to remind clients. So when they're going through this process, they might feel really panicked by the idea of what they do now is locked in stone and they've probably made a big investment with you to go through this process, and how are they going to think about every single thing that they're going to need to think of until these children become adults and you can sort of help them rest assured that they don't have, as long as their choice of person remains appropriate, then all the detail around it can be updated really easily.
(24:54):
I personally, I do find it really overwhelming for someone who's so blase about death and thinking, talking about it every single day. I actually get really emotional when I'm thinking about my death and my kids and not being there for them. So what I ended up doing, it's been a real work in progress, I guess my first letter of wishes, I simply couldn't bring myself to put down everything because it was just too hard to deal with the emotion of it. So I did what I could and then every single time I revisit it, I add a lot more in. I work off the previous and I think more about it, and it's still probably not the perfect plan, but I'm making progress and I think progress over perfection when it comes to choosing the guidance you want to leave to Guardians is a hundred percent okay.
(26:00):
I will just mention in case this is helpful for anybody, what I've done in my letter of wishes too is actually I've created a Love letters folder on my computer and I've just put the link, the OneDrive folder link or Google Drive link or whatever you've got to that folder in my letter of wishes. And then I keep updating just that folder. So whenever it's the boy's birthday or they hit a particular milestone or something happens, I write them a letter and I scan it in and I put it in that folder. And my husband does something similar, but he does a, and so I feel like now a few years in, we've got this beautiful collection of love notes to our kids that they will have access to if we both die, knowing how much we love them. And it's something that I just working on separate to the formal legal process, but over time, we're going to have this beautiful collection of notes and assets that our kids can look on to know message from their parents. Okay, I might take a break. I'm getting myself work up, so I want to just share this beautiful message from one of our customers.
Lana (27:29):
Hi everyone. Lana here from Lavenia Law. I am an estate planning lawyer and a sole practitioner. I have been using the Art of Estate Planning will precedents for approximately two years now, and there is definitely no turning back for me. They have been the best investment that I've made for my business. They are updated on a regular basis and they help me to deliver complex testamentary trust wills to suit the needs of my clients. The on flow effect of that is that profitability for my business continues to grow. So there's no hesitation from me to recommend that you jump on the out of estate planning work precedents.
Tara (28:12):
Alright, and I'm back and I just wanted to make sure it would be remiss of me if I didn't mention that. Unlike a lot of the other components of a will, the nomination of guardians, it's kind of a wish. It's mostly an expression of wish in the sense that a court can easily override it if they feel that it's not in the best interest of a minor. So yes, the test data has to make their preference for who the guardians are, and assuming everyone's comfortable with that, then that's what goes. But if there is a dispute and family members are uncomfortable with it, they can apply to the court, the family jurisdiction to have it reviewed and for an appropriate guardian to be chosen and in that process. Now, I'm not a family lawyer, but I understand in that process that obviously the wishes of the testators will hold a lot of weight, but ultimately the court will evaluate what is in the best interest of those minor children and nominate a guardianship arrangement that they think is in the best interest.
(29:29):
So that can be helpful in the sense that we can change it. And ultimately, if there's people in the family who care about the children, then they can have flexibility with an appropriate formal process to have an arrangement that works in their best interest. It can also be really unsettling for people, especially perhaps splendid families where there's a biological parents still living of the child and the test data doesn't want that biological parent to be the guardian of the child. So that can be quite unsettling for them. And unfortunately there's not a lot that we can do to give them more comfort. All they can do is express their wishes and their plan for guardianship. There is one thing that we can help them with in that scenario, which is to make sure that the guardian of the children is not the financial controller. And so we can do that by a bare trust, like a basic sort of trust, simple trust or through a testamentary discretionary trust in the will where we specifically nominate the people that we want to manage the financial inheritance and they then have to work with whoever ends up being the guardian of the minor to release funds for the minor.
(31:02):
And so at least you haven't got someone who you don't trust anymore being the guardian of the children and also in charge of their money opening it up to potential abuse. And in that scenario, yes, perhaps the relationship between the guardian and the financial controllers could be quite fraught and tense, but if you've got champions who are, they're trying to advocate and make sure that that money is protected for the children, then you would hope that they are happy to take on that role to protect the inheritance from the guardian who they might also can share the wish of the test data that they're unsuitable. And in that case, they can definitely do things like paying for a lot of the expenses directly, paying all the piano lessons and the school fees directly releasing a weekly or monthly allowance or having a bank account that they transfer money into that the guardian has access to on behalf of the minor, but keeping a bit of a reign on that spending and then all the major spending and purchases and clothes and all of that comes, the financial controller does instead.
(32:22):
So they can definitely set things up in a way so that the lifestyle of the child is what it is, but at least the money is there and preserved and protected and available for the child ultimately and not exposed to any frivolous spending or being flitted through that new family of the biological parent or something like that. Another area where people struggle sometimes is where their ideal guardians are overseas, so they just don't have that right network or community locally to them. And I just sort of shared at the beginning, I'm talking about people five hours away, not in other countries and how challenging that was for me. So that can be another thing that holds people back and what I guess I would say to clients who are in that scenario is we can be creative, we can put in a plan for the initial short term of the triage plan, I suppose, where we're just trying to work out, okay, where is the child going to go if both parents die or incapacitated on day one versus what's the long-term guardianship plan and have we got family members immigrating into Australia to take care of them or is our child or children moving overseas and are we building that around school terms or anything we can be as flexible and creative as we want as long as there's buy-in. One thing that sometimes we do have to say to clients though is that you've got some homework to do in the sense that maybe your community and relationships are not where you would hope that they would be, and that might be because you've literally been in the country for two years or something. But can you proactively work on strengthening relationships and finding friendships with people who you ultimately would hope that you could nominate them to be the guardian if it's your wish that your children stay here, for instance. So now having moved five hours away and even to my hometown where I know people and have cousins and siblings, I know how unrealistic and daunting that potentially can be trying to make friends as an adult. But at the same time, if one of the things that's important to you is to have your children grow up in Australia or in this town that you live in, then maybe you just have to kind of face the fear and be vulnerable and get outside your comfort zone and make those connections so that you can achieve that goal for your family.
(35:26):
So look, take that with the grain of salt, but we can always go, okay, well where does this mean? We don't have to have it perfect. What we do need is a plan for family. It doesn't have to be the perfect plan right away and we can work towards it and put things in place in the same way that we might work on improving our asset position. We might look at increasing our insurance and maybe we need to have some conversations and strengthen some of our relationships or work on strengthening them over time so that we can move from plan B through to plan A. So look, it's a really emotional and messy part of estate planning. Choosing guardians. It's obviously a huge privilege to be in a position to make a decision about the guardians and the care and custody of your little ones if you aren't here to do it.
(36:23):
And we just hope that that is never ever the case, but obviously making a plan is so much better than being in denial and sticking our head in the sand and not having a plan and leaving our little ones totally in the lurch. The worst thing that could possibly happen to them has happened and then it's made much worse by family members or people close to you being unprepared and frantic and conflict intention. So if there's a plan in place, it's communicated to the important people who need to implement the plan, maybe it will make one of the worst things slightly less worse. So I hope this has given you some food for thought in terms of how you could support your clients through choosing guardians. If you've got any strategies or ideas that you use with your clients, I would love to hear it.
(37:23):
I think as lawyers, it's just cognizant of us to really tap into our empathy around this aspect of estate planning and how hard it really can be for some people. We don't always have our ideal family dynamics or living dynamics where it is a simple, super simple decision and a no-brainer. For some clients it will be and they'll just be like, yep, obviously no worries. But then for others and even what seems like I would've said, my family dynamic is pretty straightforward, but when it came to actually logging in a plan, it still took us a while to really think it through and get comfortable with what would be our ideal scenario. So hopefully we can bring some empathy to this and help clients get over this hurdle and get a plan in place for this very important decision.
