Setting up a custodianship or guardianship
Requirements for a legal will
What makes a will legal?
Any adult of sound mind is entitled to make a will. Beyond that, there are just a few technical requirements:
* The will must be typewritten or computer generated (unless it is a valid handwritten will, as discussed above).
* The document must expressly state that it's your will.
* You must date and sign the will.
* The will must be signed by at least two, or in some states, three, witnesses. They must watch you sign the will, though they don't need to read it. Your witnesses must be people who won't inherit anything under the will.
You don't have to have your will notarized. In many states, though, if you and your witnesses sign an affidavit (sworn statement) before a notary public, you can help simplify the court procedures required to prove the validity of the will after you die.
Types of trusts for children
Set up trust for each child.
You can use your will to name someone (called a trustee), who will handle any property the child inherits until the child reaches the age you specify. Generally, the trustee can spend trust money for the young person's health, education, and living expenses. When the child reaches the age you specified, the trustee ends the trust and gives whatever is left of the trust property to the child. Serving as a trustee is more work than is serving as a custodian under the UTMA. For one thing, a trustee must file annual income tax returns for the trust. And because the powers of a trustee are limited to what's allowed in the will or other document authorizing the trust, the trustee may have to show the will (or at least the part of it that outlines the trustee's authority) to banks and others with whom he or she deals. The powers of an UTMA custodian, however, are set out by state statute. Most banks and other institutions are familiar with them and know what authority custodians have.
Set up a "pot trust" for your children.
If you have more than one child, you may want to set up just one trust for all of them. This arrangement is usually called a pot trust. In your will, you establish the trust and appoint a trustee, who will have the power to dole out trust money to each of the children. The trustee doesn't have to spend the same amount on each child; instead, the trustee decides what each child needs. When the youngest child reaches a certain age, usually 18, the trust ends. A pot trust provides great flexibility for the trustee. Its major drawback is that the older children can't receive their shares of the trust property until the youngest child turns 18; they may not get control over their inheritance until they are well into adulthood*.
Setting up a custodianship or guardianship
Name a custodian under the Uniform Transfers to Minors Act.
In every state except South Carolina and Vermont, you can choose someone, called a custodian, to manage property you are leaving to a child. If you die when the child is under the age set by your state's law—18 in a few states, 21 in most, 25 in several others—the custodian will step in to manage the property until the child reaches the age specified by your state's law. To set up a custodianship, all you need to do is name a custodian and the property you're leaving to a young person. You can do this in your will or living trust. For example, your will might state, "I leave $10,000 to Michael Stein, as custodian for Ashley Farben under the Illinois Uniform Transfers to Minors Act." That would be enough to create the custodianship.
Name a property guardian.
If you wish, you can simply use your will to name a property guardian for your child. Then, if at your death your child needs the guardian, the court will appoint the person you choose. The property guardian will manage whatever property the child inherits, from you or others, if there's no other mechanism (a trust, for example) to handle it.