That was a bit blunt, hey!
This has cropped up for me at times and I thought I would share some reflections.
The role of a guardian should be to provide love & care. Financial management should be kept separated which would normally be left to the trustees of your estate.
Your trust should not nominate guardians as beneficiaries of the same trusts funds for which your children would be a beneficiary.
The role of a trustee and that of a guardian have distinct responsibilities, combining them creates various risks – notably arising from a potential conflict of interest. Note that the role of a guardian expires once the child turns 18, the role of a trustee can continue until the end of the trust.
Here are 10 tricky & uncomfortable situations for someone in a combined guardian & trustee role could find themselves trying to navigate:
- Your Guardian recognizes your child may have been accustomed to a certain lifestyle, in turn seeks to access trust assets to give them that lifestyle, but in doing so is in a difficult situation to consider feelings of neglect in their own children.
- Your child would benefit from a larger room to aid their education and well-being at a time when your guardians are in the process of undertaking wider home improvements. Should the trust fund assist?
- Your child now 18 is putting pressure on their ‘guardian’ in their capacity as trustee to access trust assets as it is ‘their’ money, for an educational trip to Ibiza.
- Your nominated guardian as trustee needs to consider an appropriate investment strategy for the trust fund, and it suffers a serious loss because of poor investment decisions. Your child is disappointed.
- Your nominated guardian is going through serious financial difficulties & the wellbeing of the entire family including your child will be affected.
- Your child requires extra attention and it will require your nominated guardian to go part-time at work or temporarily give up work to care for them. They intend to draw money from the trust fund. Should they?
- Your nominated guardian is your minor child’s older sibling. Few years pass, now 18 and both intend to make a very risky investment.
- Your nominated guardian has a fractious relationship with your now adult child and refuses to release trust funds.
- Your nominated guardian predeceases your child. Thereby creating administrative problems over the new appointment of a new trustee and a new guardian.
- …I’m struggling to think of anymore…maybe they suffer a split personality disorder in trying to undertake two different roles having read the above!
It’s crucial to appoint the right individuals for both roles. Impartiality is important, but so is common sense. Where a trustee is appointed you also need to be confident with not only their technical competency but also their experience in navigating circumstances that your guardians could very well be presented with.
Hope that helps!
Mohammad Uz-Zaman is a private client trust and estate planning consultant who holds accreditations across regulated financial advice and estate planning. He holds graduate and post-graduate degrees and he is also an associate member of the Society of Trusts and Estate Practitioners (STEP). He works closely with financial advisers, general practice solicitors, accountants and investment managers from several major practices.