This has been an awfully hard decision for my husband and I. Before our two children were born, we decided it would be my husband's parents. My own mother had passed away, and my relationship with my father was strained. But we quickly learned after our kids were borned that my in-laws' parenting styles were completely different than ours. Plus, my M-I-L's health has gone downhill, and it would be difficult for them to raise small children all over again. So then we decided upon my aunt and uncle (my mom's sister and B-I-L). Their health, especially my aunt's, has also declined, although they have expressed their interest and desire to raise our children if the need arose. I have two younger brothers, but one is single, and the other is married with 4 kids, and his lifestyle and beliefs is completely opposite ours. My husband also has two siblings, but the same thing as with my siblings--one is single, the other is married with 2 kids and her lifestyle and beliefs is completely opposite ours.
We have considered close friends of ours, aunts & uncles on my husband's side, and even our cousins. As of today, unfortunately, we still have not settled on anyone. It's a toss-up between friends of ours and my cousin who will be getting married the end of this month. Needless to say our will is incomplete, but it is constantly on our mind, and we have had many discussions with my aunt and my in-law's so they are aware of the difficulty of this decision, and they are aware that they are not the "chosen ones".