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How Much Money Should You Leave Your Children’s Guardians in Your Will

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My wife and I finalized our will and estate plan last week, which included naming a guardian for our child and setting aside some money for the guardians to take care of her if we were to pass on. This was the first estate plan we have created together and it was a learning experience for us. Less than a week after signing the paperwork, we realized there were a few things we would have done differently, mostly regarding how much we should leave for the care of our children.

The importance of naming guardians for your children

Until last week, our estate plan was sorely lacking. I didn’t have a will, so my estate would transfer by law, which would be to my wife, then daughter, then other heirs (father would be next in line). My wife had a will that was several years old and predated our daughter. So we felt it important to create a new will that would not only specify that our assets would go to the surviving spouse, then to our daughter, but to also name a legal guardian for her. The last thing we wanted was to have something happen to us and have the rest of our families scrambling to determine who would take care of our little girl. It saves heartache, time, and legal bills for everyone involved.

Choosing the guardians. Choosing the legal guardian for your children is a personal matter, and one I won’t delve into in this article. But please put a lot of thought into it before deciding on someone to raise your children in the event you die. You will want to choose someone you trust implicitly and someone that has similar values (religion, ethics, eduction, money, etc.). You will then need to sit down and talk with them about it, ask and answer questions, etc.

Providing for your children after you die

If my wife and I were to both die before our daughter, she would receive the balance of our estate. But that would go into a trust that she wouldn’t be able to touch until she turned 21 or received special permission from a court to use the funds (college tuition, for example). But you shouldn’t stop there.

One section of the will included a provision for the guardians of our child. These funds are designed to help offset the cost of having another child (or children) to the household and can be used to buy a larger car, make an addition to the home, help with incidental costs, etc.

Factors to consider:

  • Guardians housing and vehicle situation
  • Food and clothing
  • Medical expenses
  • Education
  • etc.

How much should you leave for the care of your child(ren)?

The law firm we used recommended leaving at least $20,000 to offset the cost any housing additions or vehicle expenses. So my wife and I looked at each other and said, well if they recommend a minimum of $20,000, how about $50,000?

That was the number we wrote down and left it at that until the night after we signed our wills. Then we discussed that number and some other fun things like how much life insurance we need to buy. (we are currently under-insured, but are shopping for more life insurance – stay tuned for more on that topic).

Now that my wife and I sat down and thought about it a little more, we both feel that $50,000 is woefully inadequate for the long term care of our daughter. Our baby is only a few months old and would require almost 2 decades of guardianship. I can’t help but think the minimum we should have provided would be $100,000, if not more than that.

The topic of estate planning caught us off guard and is something we should have put more thought into. Unfortunately, our paperwork is signed, sealed, and delivered at this point, and redrafting our wills will probably cost a little extra (legal fees for drafting the new will, witnesses, notary public, etc.).

Our plan is to discuss this with our daughter’s chosen guardians and go from there. We also plan to address this the next time we update our will, such as if we move, have another child, or have another major life event. An estate plan can, and should, be modified to fit your needs as they change.

Do you have anything to add?

This is new ground for my wife and I, and we would love to read your responses if you have other ideas regarding how much to leave for your children’s care, or other related estate plan topics.


Published or updated February 2, 2010.
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{ 23 comments… read them below or add one }

1 Mike

We did ours a bit differently. Our executor is in charge of doling out the cash when they see fit. We made it clear to both the executor and the potential guardians (we picked a 1st and 2nd choice in case the 1st choice can’t fulfil their duties) that it’s ok to spend the money. As far as I’m concerned, as long as there is enough remaining to fund the child’s education then that is good enough.

The problem with the situation where both parents die and they have a lot of insurance is that you end up with kids that are going to be rich when they are 18 or 21 or whatever which quite honestly I think is a bad thing. Most of our insurance is designed for the surviving spouse and kids in order to keep the standard of living the same if one of us dies. If both of us die then there is the insurance money plus retirement accounts plus the house which ends up being way more $$ than the children need.

As for costs – yes, bigger car is a lot of money, a bigger house is a lot of money (we have 2 kids), we want them to take vacations etc which cost a lot more. Maybe they need a nanny/housekeeper etc. Both our potential guardians already have 2 or 3 kids so having 2 more would be a lot of work so getting more help is essential.

My only other suggestion is when trying to pick a guardian – don’t try to parent from the grave. Pick someone who you respect, trust etc and that’s it. You have to leave the parenting up to them if you and your partner pass away.

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2 Ryan

Thanks for your thoughts, Mike. We agree on picking guardians. We chose family members who have similar values as we have, and we would have no problem with them raising our daughter as their own and making whatever decisions they want.

I need to go back and look at how the estate plan executor works – Now that I think about it, I believe they can distribute the estate assets as well. So they should be able to access more funds than we specified in the will. I’ll sit down tonight and review our estate plan so I have a better understanding. It is a lot to process in one sitting. I’m glad we did it now though, and it should make it easier to understand our options when we make revisions in the future.

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3 Evan

Ryan,

A couple of thoughts:

1) Until last week, our estate plan was sorely lacking. I didn’t have a will, so my estate would transfer by law, which would be to my wife, then daughter, then other heirs (father would be next in line).
It is called intestacy and I am not sure what state you are in, but that situation might not have happened. It is a state issue. For instance in New York, the first $50,000 and then 50% goes to the surviving spouse; the remaining 50% goes to the children.

2) You are forgeting that the Guardian is likely to be the guardian/Trustee of your child’s property as well as her person. So they will have access to extra funds as their role as your child’s care taker.

3) Feel free to contact me if you want a second set of free (attorney) eyes looking at the Will for gaps.

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4 Ryan

Thanks for the input, Evan.

1) The situation I laid out applies in OH; thanks for pointing out that each state is different (I should have noted that in the article).

2) Yes, I believe they are the guardian/trustee of our child’s property, and I’m pretty sure that gives them the ability to make reasonable expenses for their care. I will double check the language used. The $50,000 I mentioned is intended to be used to offset additional costs they may incur, but it would be a cash gift upon our death and there are no limitations on what they can use it for, so they can really do whatever they want with it.

3) I appreciate the offer. :)

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5 Evan
6 Ryan

Thanks for sharing the link, Evan.

7 Meg

I’m not sure it’s a great idea to discuss how much you plan on leaving them with your child’s potential guardians. What exactly are they supposed to say? I mean, what input could they really be expected to give?

In any event you’ll likely be redrafting your wills again soon, either when you have another child or for some other reason in the next few years. $50K is a great starting point and you can always increase it later once you have more or reconsider the idea.

If you happen to die before then nobody is going to wonder why you didn’t leave them more – you’re still young and so is the baby. Most people probably don’t even think of giving their kids’ guardians much help. And I haven’t read your blog in much detail, but your baby probably has grandparents who would help the new guardians or contribute funds in some way over the years as well.

PS – It’s not like the money you leave them will ONLY be used for your child. It will get mixed right in and supplement all their child care expenses and household expenses. If you left them a substantial sum – say $500K or something – then they’d probably just buy nicer cars and a bigger house and otherwise let lifestyle inflation eat away at it (or even put it aside for their own retirement). This is just human nature and not because they won’t want the best for your child. But it’s not like they’re going to set it aside and use it to put your kid in private school while theirs stay in public or buy your kid organic groceries while they still eat fast food. So keep in mind your child isn’t going to get a dollar for dollar benefit from any cash you leave them. Better to put that in trust for her for when she’s grown or for her college education.

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8 Ryan

Meg, great response. I don’t mind speaking with them about how much we would leave them if we pass. It removes the questions or concerns they may have about being able to afford suddenly having another child in the house.

I’m also not concerned about a dollar for dollar “return on investment.” The idea behind leaving them money is to defray the added expenses they would incur; not make anyone rich or give them a set of guidelines regarding its use. We trust them and their judgment, and would hope they would take our daughter into their family as one of their own. How they use that money would be entirely up to them.

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9 Aaron @ Clarifinancial

Another thought is to consider a trust for your children and add the guardians as trustees. This puts a lot more legal resposibility on their shoulders and helps prevent your kid’s guardian from potentially abusing the money. Not right for everybody. Just a thought.

As for being under-insured, if you want to compare quotes from different agents at once without any sales pressure or confusing jargon, feel free to check out my site. We don’t sell insurance, so you can see multiple opinions without our bias. None of the experienced agents can contact you unless you specifically request contact. Could be worth a try.

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10 Darwin's Finance

In our case, we’d be leaving 3 young children to a family that’s already got a full house. $20,00 would be woefully inadequate to handle any sort of meaningful home upgrade. You can’t even redo a kitchen for that. I’m surprised they used a number that low.

We left instructions with our executor (different person than guardian so they have full discretion) to allot as much as $100,000 for the additional costs of a down payment on a new home. i.e. not to be used to vacations and maids…to allow for the purchase of a larger home only – to ensure that our kids don’t live 3 to a room. This can be done via a codicil to the will, but our attorney recommended not actually signing it but rather as an expression of our wishes. By signing an additional document, it could be viewed as a conflict with the master document – the will – which should be avoided at all costs.

Anyway, it’s good that you were thinking of it. Probably worth typing something up yourself with stuff like values you want instilled in your children, financial strategies, etc. for instance, I said how I wanted 529 money shifted into more conservative assets once they hit 13, etc.

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11 Evan

Darwin,

” This can be done via a codicil to the will, but our attorney recommended not actually signing it but rather as an expression of our wishes.”

I think you are in NY because I stalk you lol – just a heads up this isn’t enforceable in NY so if your executor hates your guardian, or more likely, is pissed because you didn’t trust them with your kids – Sh!t is going to hit the fan

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12 Darwin's Finance

Evan – we’re co-stalkers; funny. But no, not in NY. And nothing to enforce since the codicil wasn’t signed. It’s really just a document to kind of explain what we want and why we did what we did. The executor and guardians each know they’re separate and everyone’s cool. I said right at the outset it’s not that I don’t trust people (heck, one gets control of the money, one gets control of the kids – both of which are pretty damn big responsibilities) – but that this was advised by our attorney (call it a cop out if you like), but that I also agreed that a check and balance is in the best interest of the kids.

What if one of the couples goes through a divorce? What if the guardian has a gambling problem I don’t know about? These are some of the factors that could lead to a complete disaster for your childrens’ future, even if you trust them. People change, situations change, but a check and balance with our written wishes will at least improve the chances of success.

I get a sense the few people that actually have a will outlining such matters (woefully inadequate based on the people we know), many of them haven’t considered such factors and don’t even know what they signed.

Definitely important stuff to think about – and get good advice from an experienced attorney you trust.

Finally, try to avoid having your money managed by an institution that’s going to suck the funds dry with fees. I’ve seen this before too.

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13 Ryan

Darwin, thanks for the comment. I think the $20,000 was considered the starting point, but should be adapted based on the individual situation of everyone involved. We thought $50,000 sounded like a nice round number, but after we put more thought into it, it seems like it may not be enough, given that our daughter will potentially need care for a long time.

We would definitely change the amount if we have another child or if she has special needs that aren’t currently accounted for. We will probably still change it the next time we redo our estate plan. Thanks for the input – definitely something to think about.

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14 Mike

I don’t understand the sentiment of “keeping the money in the family” at the expense of your children’s guardians as well as the kids themselves.

Darwin – $100k for a bigger house for 3 more kids? Are you kidding me? If that’s all the money in the estate then that’s fine but your basically sentencing your kids, the guardians and their own kids to live miserably like sardines until your kids get booted out at the earliest opportunity. All this while there is probably 1/2 million dollars or more sitting in trust for their adulthood. What about their childhood? Any why shouldn’t they get a maid or pay for vacations? Would you rather they go on vacations with their kids and leave yours behind? I really don’t understand comment at all.

I would want my kids to become part of the new family and treated as equally as possible with the other kids – not just be boarders for a few years. I’m a lot more concerned with them growing up in a good home with good parents with good finances and values than having some nest egg when they are 21.

One other factor regarding $$ is the age of the kids – right now Ryan and I both have very young kids so if this happened (knock on wood) then the costs of looking after them would be quite substantial. Perhaps if there is a set amount set aside for this purpose it should be reduced over time? Ie if the youngest child is 15 then it’s a much different situation than if they are 3.

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15 Ryan

Mike, I could be wrong, but I interpreted Darwin’s comment as giving $100,000 to help with the downpayment on a house (I’m assuming the new guardians would sell their old place and use the combined sale price plus the $100k to purchase a larger home). Most people could make a substantial upgrade to the size of their home if they were to sell it at market price and buy another one for $100k more.

I don’t think there is a one-size-fits-all approach to this. As you mentioned, age is a huge factor, so would the current living situation as Darwin mentioned, as would someone caring for a special needs child, or a child with medical conditions.

I’m still trying to wrap my head around all of these topics and ideas. This is a new area for my wife and I and it is certainly opening our eyes.

I strongly encourage everyone with children to put thought into their estate planning and the possible guardianship/care of their children.

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16 Mike

Ryan, that is exactly how I interpreted it as well. Upgrade to a bigger house with the extra $100k.

It’s very possible that I assumed incorrectly that this isn’t possible. I live in a fairly expensive city where it is definitely impossible. The transaction costs alone would eat up half of that $50k. But even in most smaller cities that I’m familiar with in Ontario it is still a stretch to buy a significantly bigger house for $100k.

Darwin did mention he had three kids which implies 2 or 3 more bedrooms. Plus, we can’t even handle our own 2, and I just can’t imagine having 5 in total. If the kids are young then a nanny (or 2) would be the first thing I’d want. It can come out of their education fund if necessary. :)

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17 Ryan

Mike, it really depends on the variables that we aren’t privy to and goes back to finding a solution that works for your situation. I imagine everyone who commented on this article would have different needs for the care of their children.

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18 Priscilla

This topic reminded me, we need to make some changes (updates) to our legal papers. because the couple that we have as guardians/care for our children, the husband passed away 2 months ago from cancer.

Mike, if you can’t handle the 2 children you have, I’d suggest find a parenting class. We’ve taken different classes over the years by the Ezzos, see more at http://www.gfi.org
We are taking a weekly parenting class right now by Kevin Lehman called, Value-packed parenting. It is nice to get together with other parents & find out what worked or didn’t for them.

I don’t see the need for each child to have their own bedroom. Children can learn many different qualities by sharing a room. We have 6 children (oldest 16 and youngest 2 yrs old). We can not afford a home, that gives each of our children their own bedroom.

If my husband & I are not alive to care for our children, I would want the guardians to have some help in the home (if they felt they needed it)…ex. housekeeper. I’ve trained my children to help out in the home. They have learned some valuable ‘life skills’. Children need to help out (chores) I’m not running a hotel but a home.

If they need help I’d rather the $ go towards a housekeeper and the guardians do the work/interaction with the children (instead of a nanny).

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19 Four Pillars

Priscilla – thanks for the parenting class suggestion. As a matter of fact – my wife is taking one right now. :)

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20 SirSunshine

Ryan, we are in a very similar situation with two young children (3 months and 4 years) and my stepson (13 years) from my wife’s previous marriage.

According to ssa.gov, the cost to raise a child is about $250K. We’re arranging our estate such that at least this amount per child is left in individual trusts for their care. For my stepson, who would be under his fathers care rather than new guardians, we are leaving a bit less with his being older and already shared guardianship. Term life insurance is a big part of the plan and unfortunately arranging the beneficiaries appropriately has been the most complicated part. Our goal has been to ensure that our guardians efforts toward our children are in parenting and not in managing the finance burden of child rearing.

I have been relying on books/information from Nolo publishing (Nolo.com) for initial planning and document creation. We will then be following up with an estate attorney. We have used this technique before very successfully with a number of legal documents. It saves money, educates about options and impacts of legal choices and to be blunt has been more effective than any number of attorney’s we have used directly in the past.

I look forward to sharing more information on this topic and was very happy to have found your blog.

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21 kena

I have a question, my children’s father was in an automobile accident and he died. He was a passenger in the car and the insurance company of the person driving said my children are entitled to some money but their was no will, will this money come to help take care of my children now because they are only seven year old twins or do the insurance company automatically put this money in a trust. If they do this what will i have to help support two young children now.

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22 Ryan

Kena, I’m sorry to hear about your loss. I don’t have an answer for you, but my recommendation is to contact the insurance company to ask them what will happen, and it may also be a good idea to hire a lawyer or attorney. In this case you need an expert who can help you get to the bottom of the situation. Again, I’m sorry to hear about your loss, and I wish the best for you and your children.

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23 Fuzzy

I happened upon this blog when doing some research….couple of unsolicited comments:

We have allotted $1000 a month to be used for an increase in house size for the guardian. Furthermore, the trust owns the children’s share of the home so that it can be borrowed against. The guardian has the option to buy the kids out 7 years after they have moved out or sell the house and give the trust its share of the home.

The kids have no idea how much money is coming to them but after expenses, all schooling, including college…. they will will get $50k each upon graduation, half of the remainder at 26 and the other half at 31….they do not know any of the above as we want to make sure they have their priorities in order before coming into a large amount of money.

Lastly, the guardian and back up guardian are fully on board with the entire trust, guardianship, and executor (whom is different than the guardian).

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