If you queried a score of financial planners and hit them with the question, “What is the most important financial planning recommendation for young parents?” I bet 19 of them would mention something about investing, retirement planning, insurance, education planning or tax planning.  But the most important financial planning recommendation for young parents isn’t even completed by a financial planner, but instead, an attorney.

If you’re a parent with minor children, the most important planning strategy you can employ is to have a will written and a guardian established for your children in the will.  The guardian is the person charged with the day-to-day care of your children, effectively becoming their new parent.  If you fail to designate who should hold that penultimate office, your state of residence will decide for you.  Do you trust them to make the right decision?

There are at least two other officers you should appoint in your will—the personal representative (AKA executor) and the trustee.  The personal representative (PR) has the relatively short-term job of walking your estate through the probate process.  You want to choose an anal retentive (for lack of a better term) person who will follow the steps necessary to complete the detailed checklist to close your estate.

The trustee is the designee second in importance only to the guardian.  While the guardian is responsible to raise your children, the trustee is responsible to fund their upbringing.  Before you mistake the need for a trustee in your will as an optional estate planning feature reserved solely for the silver spoon crowd, let me assure you the vast majority of youngish households should be seriously considering the creation of a trust in their will and a trustee to manage it.  I’m not talking about a “trust fund” here but a testamentary trust, a vehicle not birthed until you and your spouse are no more.

The testamentary trust may not exist until you don’t, but you write the rules for it in your will.  It is likely to receive the bulk of your estate—your home and life insurance proceeds—and since most families with a proper level of life insurance will have a testamentary trust with over a million dollars in it, it is important to deliberate over the instructions you give for the trust’s use.  Many wisely give the trustee broad “HEMS” provisions, allowing for distributions supporting health, education, maintenance and support. Additionally, consider scheduling principal distributions over several years—for example, you may distribute one third of the principal at age 25, half at age 30 and the remainder at age 35.  You’re protecting the money both for and from the child.  After all, what would you have done with a million bucks at the age of 21?

A logical question many pose is, “Shouldn’t I just name one person for the personal representative, guardian and trustee?”  After I disclaim that I’m not an attorney and don’t wish to be misconstrued as one offering “legal advice” (an offense punishable by law) I may respond that I prefer to see the person best suited for each office named.  For most of us, it is not one person alone who is an optimal fit for each of the important designations in your will.  Is the person you trust most to actually raise your children also the most financial savvy and detail oriented?  Even if the answer is yes, you may still consider the benefit of having a healthy wall of separation between the guardian and the giant bucket of money in the testamentary trust created under your will. 

It’s not that investing, insuring, education planning, retirement planning and tax planning aren’t important—in fact, they have the highest probability of impacting your life and the lives of your family members, while the guardianship and trustee provisions in your will are unlikely ever to be exercised.  But in the unlikely case that you and your parental partner are both taken from this earth in an untimely fashion, you’ll make that transition much more peacefully knowing someone you trust is designated to care for your offspring and their financial wellbeing.  More succinctly, you can’t write a will after you’re dead.