Legal Question in Wills and Trusts in Texas

Re: What is the best way to take care of my children after my death

It sounds like you are intending to appoint your parents as guardians of your children, and you intend for them to care for your children if both you and your husband die before the children reach age 18.

There are two ways to ensure that your children will benefit from the money - either leave it directly to them, meaning a court-supervised guardianship will be necessary, or leave it to them in trust.

I would recommend setting up a trust to be the contingent beneficiary of your policy, with your children as beneficiaries of the trust until they each reach a certain age which can be older than 18 if you want. You can make your parents the trustees. You may decide to set up the trust now, or set it up in your will so that it will spring up upon your death.

Although you will need to spend money now to hire a lawyer to set up the trust, and it will hopefully never need to be used (since you will both probably survive for another 8 years), in the event of your death it would have the following benefits over doing what you have proposed:

1) Your parents could just be appointed guardian of the person, not of the estate, and they would have more freedom to invest and spend the trust funds for the children however they see fit. Also there will be much less court and legal fees than there would be in a guardianship of the estate.

2) Unlike a court-supervised guardianship, which would be necessary without the trust, the trust could continue until your children are older, if the funds are not all used up. You would probably prefer that the funds be saved for college tuition than given to each child as they turn 18, only to be used to buy that nice Mustang convertible.

3) If you leave money to your parents, then even though they have the best intentions, they could lose it through bankruptcy, a lawsuit if they were to hit a school bus, or death, if their estate plans were not set up properly or if they had major medical expenses outstanding. I definitely do not recommend leaving money outright to your parents if the intent is that the money be used for your children.

4) Similarly, if you leave the money to your children, then even if it is managed in a court-supervised guardianship, the money would still not be safe from creditors of your children - again, imagine that one of them has a car accident and kills someone. The money would not be protected from a lawsuit under a guardianship, but it would be protected if it were in trust.

In conclusion, you should consult with an attorney regarding setting up a trust. The attorney should also assist you in changing the beneficiary designation on the life insurance policy, once the trust is set up. You will want to discuss the arrangements with your parents, since they would be so involved if you were to pass away.