Responsibilities of a Guardian in Estate Planning
Most couples procrastinate in writing a will because they cannot decide on a guardian for their young children. A guardian is an important figure in the will. This is especially so for a single parent, and for divorced couples with children.
Importance of a Guardian
A guardian will step in to take care of your young children if you and/or your spouse pass away prematurely. Your appointed guardian will gain custody of your children and will help to take care of them. He/she will also manage your estate before the eventual transfer to your children when they reach adulthood. In Singapore, the Guardianship of Infants Act provides the laws for guardianship.
Who can be a Guardian?
A guardian can be anyone who is an adult and is of sound mind. In a more sentimental sense, a guardian should also be someone whom you and your spouse trust, someone who loves your children, and someone who is able to exhibit maturity and discipline in money management.
Section 6 of the Guardianship of Infants Act gives priority to the surviving parent to be the guardian of the children. However, in some situations where the surviving parent is deemed not appropriate to be a guardian, this role can also be appointed by a will or by the court. For example, a divorced lady might not want her ex-husband (who is a gambling addict) to be the guardian of her young daughter when she dies.
It is possible for the legal representative to assume the role of guardian and trustee of your young children. However, given these heavy responsibilities, it is recommended to have a different person to perform the role of guardian (if the situation allows).
Responsibilities of a Guardian
- To provide care for the children – This is to ensure that the physical and emotional well-being of the children is taken care of until they reach adulthood.
- To manage the estate for the children – This role is sometimes known as the financial guardian of the children. A financial guardian’s responsibilities are as follows:
- Receiving life insurance proceeds on behalf of the children. It is not uncommon for parents to name their young children as beneficiaries in a revocable (S49M) insurance nomination. When the parent passes away, the guardian of the child can receive the insurance proceeds as trustee for the child.
- Paying for the child’s health, education and maintenance. The appointed guardian will need to pay for the health, education, and maintenance of the minor, including medical bills, clothes, food, school tuition, and vacations.
- Investing and managing the child’s assets. The appointed guardian will be responsible for deciding where the child’s liquid assets will be held and who will be responsible for overseeing their investment, whether this person is the guardian himself/herself or a professional financial adviser. If the child owns any real estate, then the guardian will be responsible for paying all of the bills for maintaining the property, such as taxes, mortgage and insurance.
- Preparing and filing estate income tax returns. If the minor beneficiary incurs estate income tax on the income produced by the estate, the income tax returns and notices of assessment will be issued in the name of the guardian.
- Handing over the deceased parents’ estate to their child when he/she reaches adulthood, or according to the terms in the will or testamentary trust.
- Exercising personal discipline to have his/her own estate planning done up just in case he/she dies before discharging his/her guardianship duties.
- Segregating the child’s assets from the guardian’s personal assets. This is to prevent possible dilution of the child’s assets by the guardian’s personal debts or liabilities.