The single most important thing that couples with young children are concerned with when preparing their Wills is: “If something happens to us, who will take care of the kids?”
That question is addressed in another article. In short, the family court will appoint a guardian to look after your children, based on what they believe to be the children’s best interests. Significant weight will be given to your choice of guardian (as stated in your Will), however, the court is not obligated to appoint the person you choose, and may decide differently.
The next question that is raised is: Who manages the assets for the children?
Even a family with minimal savings and a heavy mortgage typically has life insurance policies that not only pay off the entire mortgage but also provide additional payouts to the beneficiaries.
This could result in the children inheriting multiple assets (e.g., cars, house) and a significant sum of a few million shekels. These assets would be used to support the children, and hopefully, there would be some remaining funds that would be transferred to the children once they are old enough.
It’s important to choose the right person to properly manage the assets and use the funds responsibly.
Trustee or Guardian?
Many people might think that this is the role of an Executor. After all, an Executor (מנהל עיזבון), is a person who carries out the Will. However, in most cases, no executor is actually appointed, and even when one is appointed, his/her role is limited by definition (usually to a two-year period).
For long-term management of assets on behalf of the children, there are two types of roles:
- The legal guardian; or
- A trustee
What is the difference between the two options and how do I choose which one is best for my family?
Guardian
A guardian is someone appointed by the Family Court to look after the affairs of someone who is unable to do so themselves.
Typical examples include appointing a guardian for an elderly parent suffering from dementia or someone born with a cognitive disability.
Similarly, in the tragic case of the death of both parents of children under 18, the court will appoint a legal guardian for the children.
What are the guardian’s roles?
A guardian can be appointed for financial matters, as well as medical and personal matters. In most cases, one person is appointed for both categories, but it is possible to appoint a guardian for just one category.
All guardians in Israel are supervised by the Administrator General, or AG (“HaApotropus HaKlali”). This means that the guardian is obligated to submit forms detailing the children’s assets, expenses, and sources of income, as well as annual reports to the AG. This also means that any request that the guardian submits to the Family Court (for example, for the purpose of a specific investment or selling property) also gets sent to the AG, who would file a response.
Guardianship for children ends when they turn 18, at which point the children assume full control over all their accounts and assets.
Trustee
A trustee is a person appointed by you, the parents writing the Will, to manage and control assets for your children.
Trustees do not require a court order to make their appointment official.
The role of the trustee is not to look after or raise your children, but rather only to manage their assets. To be clear, even if you appoint a trustee, the court will still appoint a guardian to raise your children, but the Trustee would handle their finances.
Trustees are not typically supervised by the Administrator General. However, when the beneficiaries of the trust are minors, the AG may still require some involvement and supervision.
The trustee’s role does not necessarily end when the children turn 18, but rather, at the point determined by you in your Will. This can be a later age defined by you (for example, age 23), or upon fulfillment of certain requirements or milestones (such as marriage or completing a degree).
When or why would I want to appoint a trustee?
It may be simpler to have one person, the guardian, raise the children AND manage the assets. However, that arrangement might not suit your needs.
For instance, you may feel that your chosen guardians (for raising your children) are not the best choice for managing assets. This might be because it isn’t their field of expertise, or perhaps you don’t want to burden them with additional responsibilities.
Another reason for preferring a trustee would be if you don’t want your children to gain control of their assets at age 18.
Another common case in which appointing a trustee is a good idea is for divorced/separated couples. If you are divorced, your ex won’t inherit you, but as your child’s parent, s/he would effectively control any assets your children inherited until they turn 18. If you’d like to avoid that situation, you can appoint a trustee in your Will.
How do I choose?
Each of the options has advantages and disadvantages.
Here are some of the advantages and disadvantages of having a guardian manage your children’s assets:
Advantages:
- The person raising your children has direct access to the funds needed to support them
- Guardianship is a well-known role; banks are familiar with guardianship accounts
Disadvantages:
- You cannot be 100% sure who the court will appoint as guardian
- You may prefer to separate the two roles (raising the children and managing the assets)
- The children receive control of their assets at age 18, even though they may not yet be ready to handle them responsibly.
Here are some of the advantages and disadvantages of having a trustee:
Advantages:
- You are not dependent on the court to make the final decision
- The trustee can manage the assets even after your children turn 18
- You can separate the roles of who is looking after your children (the guardian) and who is managing their assets (the trustee)
- You can give your trustee greater freedom and discretion in how to invest and manage the assets
- Lower-level supervision by the AG
Disadvantages:
- Trusts are not commonly used in Israel, and some banks may be reluctant to open trust accounts
- The person raising your children (the guardian) doesn’t have control of the money needed to support your children and depends on the trustee. Therefore, choosing a trustee who will cooperate well with the guardian and provide the necessary funds needed is crucial.
- The extent of the AG’s actual involvement and supervision remains uncertain due to limited precedent in Israeli case law. However, the AG’s supervision over a trustee would not exceed that of a guardian.
- There may be tax implications of having a trustee
To summarize, even though it is an unlikely scenario, a good Will should address the possibility of your children needing a guardian or a trustee. Based on the information provided above, you are now better equipped to choose the right solution for your family.
When creating your Will on EZwill, you’ll have the choice to choose between a guardian or a trustee for managing your children’s finances, as well as choosing the age at which the trust would end, and some other provisions as well.
The information provided in this article is for informational purposes only and should not be construed as legal advice. If you feel that you need legal advice for your situation, you can schedule a consultation here.
Table: Comparison of Features between Guardians and Trustees
| Guardian | Trustee | |
| Appointed by who? | Family Court | The Testator (the person writing the Will) |
| Supervision | Supervised by the AG | Possible limited supervision by AG |
| Termination | When children turn 18 | As determined by the parents in the Will |
| Control | Over personal, medical, and financial matters | Over assets only (financial matters) |