When considering wills and inheritances, most people think about adult inheritors, however, there are situations where children will be left with property and other assets. Leaving assets to minor children (under age 18) can be trickier from a legal standpoint, as individuals under 18 are not usually able to understand the complexities that come along with monetary gifts. Even more, some children inherit monetary gifts that involve more intricate planning and management, such as stocks, CDs, real estate, and other investments.
While most people know that it is wise to name a guardian in their will for their minor children, most people do not realize that this named guardian will not automatically be able to manage the children’s inherited money. Once you die, your will goes through probate, at which point a guardian is named for your child. This will usually be the person you name. As for inheritances, the court will be in control of this money--not the guardian--until the child reaches 18. When the child reaches legal age, the court will disburse the inheritance as one lump sum.
Once this child reaches legal age, this money is completely theirs, and unless they are willing to let a trustworthy adult help them manage it, chances are that money will not be managed as well as it could be. While some people may consider opening a custodial account for a minor, this also may not be the best method of leaving money to a child. In custodial accounts, a designated custodian, not the court, will be named to manage the funds. However, all of the money will still be disbursed to the child once they reach legal age.
To avoid money management issues, it may be best to set up a living trust for your child. In your will, you can also name someone who will manage the inheritance until the child takes over. Using this option, the trust will not be handled by the court. Revocable trusts are set up while you are alive and you decide who will inherit the money and at what age. With revocable trusts, the person you choose to manage the money will still have power even if you become incapacitated. (This is not always the case with irrevocable trusts).
All assets that are in a trust are protected from the courts. This is beneficial because court hearings and other legal technicalities can be expensive, thus reducing the value of the inheritance. Trusts also protect the money from irresponsible spending, as you are able to name a trustworthy individual who will manage the money. Even more, assets in trusts are protected from creditors. This is especially important should a divorce proceeding come into the picture.
Seek an Attorney
If you have questions about estate planning or would like to start planning your estate, contact Clear Counsel Law Group to set up a consultation. The attorneys are Clear Counsel know how to help plan estates based on individual needs.