Leaving assets behind to loved ones lets you support their personal and financial wellbeing after you’re gone.
It’s an invaluable part of estate planning, and it requires you to understand how to maximize the value of your assets for the benefit of your family.
Leaving assets to minor children creates a new set of challenges that must be addressed when planning for the future of your estate.
The right estate plan ensures that children receive their inheritance while preventing many of the problems that can arise. The following will help you determine the best estate planning strategy for you and your family.
Minors and Estate Planning Law
Minors can’t gain legal ownership of inherited assets until they reach the age of 18 or 21. State laws and the terms outlined in a will influence when and how a minor receives assets.
Parents typically name a guardian for children in a will. If a guardian hasn’t been established, family law courts will appoint one through the probate process.
In addition, the courts (not the guardian) will remain in control of the assets until the child reaches the legal age to obtain full ownership.
The Uniform Transfer to Minors Act (UTMA) outlines the rules that regulate how assets are managed for minor children. This includes the creation of a custodial account in which funds can be placed.Other expenses must be documented and approved. These include the cost of a court guardian, legal processes, and the use of an attorney to represent the minor child.
These and other costs must be covered by the estate, and making exceptions to existing rules can be a challenge.
Consulting with an estate planning attorney who understands the distribution of assets to minor children is critical to a sound estate plan.
Estate Planning for Children
Assets that are left to minor children include real estate, stock assets, and cash among others. The value of assets can influence the level of involvement from the courts due to a minor’s inability to manage assets on their own.
Any sale, transfer, or other process related to the assets while the child is still a minor must be overseen by the courts in order to protect the needs of the child.
Appointing someone to handle the assets distributed to minors is the best way to avoid the time and money required when courts intervene.
A children’s trust lets you dictate the terms related to the distribution of assets to a minor. This includes naming the person who’ll manage the inheritance as well as the time and manner in which the assets are fully transferred to the child.
A children’s trust can only be funded once the probate process has been completed. So you’ll need to determine if this will impact the value of the assets you leave behind. The trust goes into effect after your death and doesn’t apply to incapacitation.
Revocable living trusts can be used to leave assets to minor children. More importantly, a living trust allows assets to be managed and distributed even in cases of incapacitation.
This provides greater flexibility in ensuring that minor children receive the assets according to your preferred timeline. Assets in a revocable trust are protected from factors related to outstanding debt, divorce, and the courts.
Caring for Minor Children After You’re Gone
Regardless of the estate planning option you choose, it’s important to have the legal resources you need to understand how each one works, its effect on long-term goals, and the issues that can arise.
Your estate planning attorney will guide you through the complex court processes and help you minimize the expenses and time required to process your will.
The right will allows you to specify the terms of your asset distribution. You can better meet the needs of minor children while protecting the assets they’ll receive when you’re gone.
Failing to create an estate plan that considers the needs of minor children can have lasting impacts on their personal and financial wellbeing. Taking the right steps today creates a more secure future for your loved ones tomorrow.