Teachers: Don’t Forget Your Own Plan
Teachers have a gift for planning—it comes with the turf. Semester plan? Check! Personalized goals for students? Check! Scheduling for the practice test? Check! But, amidst all the planning to help children learn and grow, it’s important to make time for personal plans too—including care and estate plans for ourselves and our families. Attorneys remind us that arrangements for our benefits and beneficiaries, as well as our own minor children need care too. Read on for mistakes to avoid and pointers about making the best use of estate planning basics.
Naming Beneficiaries and Appointing A Guardian
Let’s face it: most teachers are not raking in a fortune, despite diligent and vital work. That’s why it is essential to carefully leverage the resources of all benefits, and ensure they are accounted for in a basic estate plan, as Wilson Law Group encourages:
Estate planning is not just for the wealthy. It is a practical way to protect your loved ones, reduce confusion, and ensure that your financial and healthcare wishes are followed if you die or become incapacitated (unable to manage your affairs). For schoolteachers, thoughtful planning also helps ensure that benefits such as retirement accounts, pensions, life insurance, and survivor benefits are directed to the people you choose.
For teachers (or anyone) with minor children, one of the most important estate planning tools to put in place is a basic will. Though many of us may put off making a will, because we think about them purely as a way to designate assets for others upon our death, a will actually lets us name the guardians we choose for our minor children, should the worst happen. Hopefully, for example, the benefits from our teaching work include a pension or 401k plan, as well as life insurance. These accounts allow us to designate beneficiaries to receive the associated funds—so it is key to periodically review them and make sure beneficiary designations have kept pace with life. However, as lawyers remind us, it’s still best to have a will:
- Employer-provided benefits may offer financial support, but they do not determine who will raise your child if something happens to you. A properly drafted estate plan allows you to nominate a person you trust to serve as a guardian.
- Your will nominates the person responsible for handling assets that do not pass by beneficiary designation, joint ownership, or trust. It can also nominate a guardian for minor children. Even if retirement accounts and insurance benefits pass directly to named beneficiaries, a will helps ensure that the rest of your estate is distributed according to your wishes.
Guardians Are Fiduciaries: Required Bonds?
When parents write a will and name guardians for minor children, they are not merely asking relatives or friends to do a favor in the face of a tragedy. Guardians are legally bound to their responsibilities, and considered fiduciaries in the eyes of the law, as attorneys at Robinson & Henry explain: A fiduciary relationship exists between two people when one of them has a legal or ethical obligation to protect the other person’s interests.” Accordingly, guardians must act with the highest degree of integrity, placing the interests of minors in their charge (aka “wards”) above their own. This elevated legal duty exists because once appointed, the court entrusts a guardian with the life and assets of a child who cannot advocate for themselves. Failure of a guardian to meet the fiduciary standard, such as commingling funds or neglecting a ward’s needs, can lead to legal consequences, removal and even personal liability. To protect wards, courts frequently require guardians to obtain a type of fiduciary bond, which may be specifically referred to as guardianship bond.
Guardianship bonds serve as a financial safeguard, ensuring that individuals entrusted with these roles act honestly, responsibly, and in accordance with all court directives and state laws. The bond amount and specific bond terms are usually set by the courts. This determination is based on the circumstances of the individual and assets being protected.
A guardianship bond is a legally binding, three-party contract that works like this: A trusted Surety guarantees to the Obligee (the Court on behalf of the ward) that the Principal (the guardian obtaining the bond) will comply with all applicable laws and standards. If the Principal causes financial harm by failing in their duties, the Surety compensates the injured parties, up to the bond’s value.
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Good To Do: Avoid These Mistakes
According to Wilson Law Group, paying careful attention to all forms associated with every hard earned benefit, is an important way for teachers and other working parents to ensure children receive critical financial resources in the face of an emergency. Common mistakes to avoid include:
- Outdated beneficiary forms. Life changes, such as marriage, divorce, remarriage, or the birth or adoption of a child, can render old forms incorrect.
- Directly naming a minor as a beneficiary. Doing this can trigger a court-managed process instead of naming a trust and allowing a trustee to manage the assets for the minor.
- Forgetting contingent beneficiaries. If a primary beneficiary has died and there is no named backup (known as a contingent beneficiary), the account may default to the estate and be subject to probate.
- Misaligned pension survivor elections. Choosing a survivor option that does not match your will or trust can leave a spouse with less income than intended.
- Overlooking “small” benefits. Accrued leave payouts, supplemental coverage, or other lesser-known benefits may seem minor, but they can provide meaningful short-term support for your family when they need it most.
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