“What if Money is Left to a Minor?” by Attorney Colleen Sinclair Prosser (Audio)
The attorneys at Sinclair Prosser Gasior provide assistance with structuring an inheritance you leave behind so heirs or beneficiaries can inherit as quickly as possible and so the inheritance is as protected as possible. There are many circumstances in which your efforts to leave money to a loved one can be complicated by legal rules that are in place. For example, if you leave money to someone who is disabled and who is collecting means-tested government benefits like Medicaid, you could end up putting your disabled loved one’s benefits at risk unless you use a special needs trust.
One of the many situations where you will need to make specific plans for the appropriate structure of an inheritance is when you are leaving money to someone who is under the age of 18. A person who is under age 18 is considered a minor and is not legally allowed to inherit directly and begin managing the money that is left behind. It’s important if you are planning to leave money to a child that you understand exactly what happens to this money after you pass on. You should also work with an attorney to structure the inheritance in an appropriate way so you control what happens to the inheritance rather than just allowing default laws to dictate what happens to the money or property.
What Happens When Money is Left to a Minor?
The outcome of leaving money to a minor will vary depending upon the mechanism by which the money was provided to a child.
If money is left to a child in a will, the court will need to appoint a guardian to manage funds. The guardian may not be the person you would have preferred to be put in charge of caring for the child’s inheritance. The involvement of the court in choosing a guardian and monitoring spending of the child’s inheritance can be burdensome to families. The guardian will manage money and property on behalf of the child until the child is 18, at which time the child will receive the inheritance and take control over its management. This can be a big problem if an inexperienced 18-year-old is just given a large amount of money without any strings attached or limitations imposed.
Some people will leave money to a minor through the Uniform Transfers to Minors Act. This Act makes it easier for you to specify who should manage an inheritance and can allow you to delay having a child receive an inheritance until the child is age 21. Making a transfer under UTMA is a relatively simple process that the attorneys at Sinclair Prosser Gasior can help you with when you make your estate plan.
You also have the option of creating a trust to provide an inheritance to a minor. This is more of a process with additional legal requirements compared with transferring assets under the Uniform Transfers to Minors Act. However, creating a trust will give you the maximum amount of control. You can specify a trustee who will have a fiduciary duty to manage money for the best interests of the child and you can set specific conditions or limitations on what the money is to be used for and when the child will take control over managing an inheritance.
Many families find that the creation of a trust is the best way to provide an inheritance for a child, but you should work with an attorney to determine if this is actually the best course of action for you or not.
The attorneys at Sinclair Prosser Gasior will work closely with you to determine how best to leave an inheritance to a child who is under the age of 18. We can help you to evaluate the pros and cons of different options such as using a last will and testament to transfer assets, transferring assets under the Uniform Transfers to Minors Act, or using a trust to facilitate the transfer of assets. We can also help you to implement your plans for the transfer of assets by using the most appropriate legal tools available to you.
Reach out to us today so we can get your plans in place now in case something happens to you in the future.
- 25 Years with WNAV - June 22, 2022
- Capital Gains Taxes and Trust Assets - April 21, 2022
- Estate Planning Mistakes - March 29, 2022