When a child inherits significant assets, they often lack the maturity to manage them responsibly. A guardianship of the estate is a legal tool that protects a child’s assets to preserve their future quality of life. Still, being a guardian is a significant responsibility with complex legal obligations to fulfill. Working with a trust accounting expert is essential because their experience trust accounting easily translates to the probate accounting needed for a guardianship. Here is our guide to this type of probate guardianship:
What is Guardianship of the Estate?
People create a guardianship of the estate to manage a child’s income, money, and other property until they turn 18.
This guardianship occurs when a court orders someone other than the child’s parents to manage a child’s estate. Due to the complex financial nature of these instruments, expert trust accounting services are often essential.
Several situations require a guardian of the estate, but one of the most common is when a child inherits money or assets from a loved one, such as a grandparent who has passed away and wants to keep the money separate for the benefit of a child.
Typically, the court designates an individual to be the guardian under these circumstances. The court sometimes appoints the same person to be the child’s guardian and the guardian of their estate, but it also sometimes appoints two separate people.
Guardianship is not necessary when a child only owns or receives the following:
- Inexpensive toys and clothing
- Social security benefits
- Federal and state benefits
Related Article: Helping Minors as Guardians of Their Estates
What this Role Entails
A person responsible for the guardianship of an estate has several key fiduciary duties that are essential to preserving the beneficiary’s quality of life. Key responsibilities include:
A guardian of the estate is responsible for carefully managing a child’s assets and making prudent investments. A guardian must make calculated and cautious decisions when deciding to make investments on a child’s behalf, which can be difficult without the help of a fiduciary expert.
Keeping Assets Separate
A guardian must also keep the money and property in a child’s estate separate from everyone else’s, including their own. This duty requires opening bank accounts for the estate using the guardianship’s information. Depending on the scope and complexity of the estate, this can be incredibly difficult without the expertise of an experienced CPA.
People create guardianship of the estate to manage a child’s property when they own or receive valuable assets. For example, if a child inherits a house, vehicle, or large sum of money, a guardian is usually introduced.
Related Article: What Types of Assets Are Subject to Probate?
Interest-Bearing Accounts and Insurance
Another key responsibility for guardians is placing estate funds in interest-bearing accounts. Moreover, guardians must deposit funds in accounts held by federally insured financial institutions, like credit unions.
Guardians must also ensure there is adequate insurance covering estate assets for the duration of the guardianship or until they sell or distribute assets.
A guardianship of the estate also requires keeping complete, accurate records of each financial transaction that impacts the estate. Maintaining these records is incredibly complicated without the assistance of a trust accounting expert.
Records must reflect the money and property an estate receives and spends, the date of each transaction, and the purpose of each transaction. Guardians must be able to provide a detailed description of what is left after paying an estate’s expenses.
Related Article: What is Considered a Receipt for Court Accounting?
A guardianship of the estate requires filing a petition for courts to approve their accounting one year after assignment and a minimum of every subsequent two years.
Courts may even request a guardian to justify expenditures. Failing to file for accounting results in courts ordering a guardian to file one and possibly in the guardian’s removal. This process is complicated and requires adhering to state and local laws and regulations.
Only by working with a trust accounting expert can you guarantee that you comply with regulations and the format specified by the California Probate Code.
Related Article: What Should I Include in a Trust Accounting
Get Expert Trust Accounting for Guardianship of the Estate
A guardianship of the estate is essential to preserving the future security of minor beneficiaries. However, this role is rife with financial complexity. Working with a trust accounting specialist is integral to ensuring the guardian manages assets adequately and that the beneficiary receives what they are entitled to.
Fortunately, with Marcia L. Campbell, we offer specialty CPA services to help preserve a child’s estate until they can access it. Contact us to get started.