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How Does a Guardianship for Minors Work?

A guardianship is a type of probate proceeding where a person is appointed to oversee the property and finances of a minor. There are many circumstances that might necessitate such a guardianship. For example, if a minor inherits or receives a large amount of money, a court may appoint a guardian to take custody of those funds. The guardian can then make periodic disbursements of estate funds to pay for the minor’s education, health, or overall maintenance.

Guardianships and Structured Settlements

Here is an example of how guardianships work. This is a recent case from here in San Diego. In 2005, a San Diego resident was killed after a tree fell on his truck during a rainstorm. His family subsequently filed a wrongful death lawsuit against the City of San Diego, which led to settlement agreement. The settlement provided for payments of $1,100 per month to the each of the victim’s two minor children. The children were also slated to receive lump-sum payments on their 16th birthdays and stipends to pay for their college educations. The City financed this structured settlement through the purchase of an annuity from an insurance company.

The court overseeing the settlement ordered the $1,100 monthly payments be made to the children’s mother as guardians of their respective estates. As guardian, the mother was required to file periodic accountings with the court illustrating how the funds were used. At one point, the mother moved to terminate the guardianship, arguing the annuity was not a guardianship asset. The court denied the motion, noting that while the annuity itself did not belong to the children, the monthly payments from that annuity did, requiring the guardianship to continue. The mother must therefore continue providing accounts to the court with respect to the $1,100 monthly payments for each child.

Guardianships v. Custodial Accounts

As this case illustrates, guardianships are actively supervised by the probate court and may last for several years, usually until the minors reach the age of 18 or the guardianship’s assets have been depleted. This is why, if you plan to leave significant assets to a minor as part of your estate plan, you should consider the potential need for a guardianship or similar mechanism.

In fact, many wills and trusts provide for “custodial accounts” in such cases. A custodial account is similar to a guardianship in that money is given to an adult, usually a parent, for the benefit of a minor. But unlike guardianships, custodial accounts are generally not supervised by a court. This means the custodian does not need to prepare formal accountings for a judge.

It should also be noted that there is a difference between a guardianship of a minor’s estate and person. The case above describes a guardianship of a minor’s estate—that is, it applies to property rather than the child’s custody or medical care. A guardianship of the minor’s person is necessary when someone other than a parent must assume control of the child’s physical care. Your will should name a guardian of the person for any minor children you have.

Guardianships can be a complicated matter. An experienced San Diego estate planning lawyer can advise you on the law regarding guardianships of a minor’s estate or person. Contact the Law Office of Scott C. Soady if you need to speak with a guardianship attorney today.

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