Angelique Friend Probate Services can handle all types of complaints regarding your situation. If you or a loved one is dealing with complaints from families, then continue reading, especially when it entails properly leaving assets to minors.
Leaving assets to minors can cause a lot of legal complications if not done correctly. If you don’t leave clear instructions in a will or living trust, the state laws and courts may not distribute your property and assets the way you’d like. They will even take from your assets to fund the court proceedings and lawyers needed to decide how to distribute those assets.
This could leave your children or young heirs without access to the resources you may have saved specifically for their care. While minors can be beneficiaries of property or assets, they can’t legally own, operate, or utilize those assets until they become of age.
If a minor is named as a beneficiary, but there is no mechanism put in place by you specifying how the minor will receive those assets, then the probate court will do it for you by appointing someone to serve as a property guardian. Then, when the child becomes of age, the entire property or asset will become entirely theirs, minus the cost of the guardian.
This might work fine in some cases—particularly where the assets to be left are pretty minimal. But for some, there could be concerns about who the court might appoint as the property guardian or the magnitude of a young person receiving a large sum of money or valued property when they aren’t experienced enough to know how to use it wisely.
Depending on the value or type of asset you want to leave to a minor, who you want to be in charge of those assets for the minor, and what control you want there to be over the distribution of the assets, you have a few options.
Naming A Custodian Under the Uniform Transfers to Minors Act (UTMA)
The UTMA is a law that has been adopted in almost every state in some capacity that allows you to choose someone (a “custodian”) to manage property that you leave a child until the child is old enough to do so themselves (21 in most states, 18 in California). If the child is over 21 when you pass, then they will receive the property directly.
You can do this by naming the custodian in your will, living trust, or life insurance policy with language that includes the name of the law. For example, “I leave X to [name of the custodian], as custodian for [name of the child] under the Uniform Transfers to Minors Act”.
The potential downside to this is that you might feel even at 18 or 21, a young person may not be responsible enough to manage property entirely on their own and might still benefit from having an older adult to help them through this. If this is the case, then you might consider establishing a trust instead.
Establishing a Trust
You can establish one single trust for several children (a “family trust”), or you can establish a trust for each individual child. With a trust, you get to specify the age that a person receives money, what the funds are to be used for, or stipulations to receive it.
For example, you might specify that the inheritor will receive 10% of the funds at 21, 30% when they turn 30, etc., or that the funds are to be received when the person graduates from college.
A trustee has more responsibilities than a custodian—they need to file annual income tax returns for the trust and communicate closely with the one inheriting the trust about amounts that can be taken out and for what purposes. They also may need to prove that they are using funds properly within the outlines of the will or trust documentation.
This can be a good option for larger inheritances where you might worry about a young person inheriting one large lump sum and “spending it all in one place”, rather than using it as a “nest egg”. Another benefit to this arrangement is that the funds in the trust are protected from third parties. For example, if the inheritor is in divorce proceedings or is the target of a lawsuit, the trust cannot be considered as income or assets.
But the downside is that it can be costly and timely to maintain—the trustee has to maintain the trust, and they pay for annual tax returns out of the trust. It’s important to consider this when deciding if it’s worth the cost.
Another downside to appointing a friend or family member is potential relational difficulties between the trustee and the one inheriting. It could lead to financial, emotional, and legal difficulties. While there is legal recourse for the inheritor if they feel the trustee is not handling their inheritance well, this could cause personal strife, particularly if the trustee is a relative. The trustee also has the potential for liability issues.
No matter the amount of the inheritance or assets, we recommend getting assistance with the process to ensure your heirs receive as much as they possibly can in accordance with your specific wishes.
Angelique Friend and her team at Probate Services Inc. provide services to help you with financial and life planning such as Trust and Estate Administration or setting up a Trust Protector, Professional Conservator, Guardianship, or Custodian. Angelique Friend and her staff ensure all precautions are taken to protect your income, property, and assets. We make it a priority to create customized solutions and provide services that fit the unique needs of each client in the most cost-effective and efficient manner. If you’re interested in service with compassion, trust, and confidence, get in touch with us today at (805) 604-1998 or visit our website to learn more.
