Should You Leave Your Children Your Estate if They Are Under 18?
Although you may plan to leave money or other assets to your children as part of your estate plan, considering their age is important when crafting that plan. Many people overlook the fact that minor children under the age of 18 cannot inherit property in their own name in California. Consequently, when leaving an inheritance to minor children, provisions need to be made to name an adult to manage that property for the children until they can legally do so themselves.
Typical Ways That a Child Will Inherit Property
Your child can inherit property in several different ways, either through a will, a trust, as the beneficiary of a retirement account or life insurance policy, or through money left for the child as a gift under California’s Uniform Transfers to Minors Act.
The Minor Child as a Trust Beneficiary
When your child is named as the beneficiary of a trust, the trustee of the trust will be responsible for distributing the assets in accordance with its terms. The trust will set out at what point the assets will be transferred to the child. Up until that point, the trustee will be in charge of managing and distributing the money, and filing taxes on behalf of the child and it will be their job to keep records of how the money is spent, invested, and distributed. Once the child reaches the age set out in the trust, that child then gains access to the money and becomes responsible for managing it themselves.
Inheritance to a Child Under the California Uniform Transfers to Minors Act
You may choose to leave a gift to your children under the Uniform Transfers to Minors Act. This allows you to leave money to your minor child to be managed by an adult you have named as a custodian. You can do this by adding a phrase to your will specifying the name of the custodian, the name of the child, the amount of the gift, and the age at which the child gets access to the funds. In California, that can be between the ages of 18 to 25.
The custodian of a UTMA account has the right to collect, manage, and invest the property on the child’s behalf. While they must act honestly and prudently in that management capacity, the court will not be relied upon for any approval. Any assets that are transferred to the child after the custodianship ends can be used in any way the child decides.
A UTMA Account Set Up By an Executor or Trustee
A UTMA account can be set up by the executor of a will or by a trustee. In California, once that amount exceeds $10,000, the court must approve that account unless the custodian is an entity that doesn’t require a bond.
When is a Property Guardianship Required?
If the assets left to a minor child have not been left in a trust or a custodial account or without naming how the property will be managed, the court can appoint a property guardian, otherwise known as a guardian of the estate. For instance, if an individual dies without a will and the minor children inherit their property, the court must appoint a property guardian for each child.
Unlike a guardian of the person, the guardian of the estate is responsible for managing the child’s money and making prudent investments on their behalf. A property guardian is responsible for filing formal accountancy with the court to show how money has been spent, distributed, and invested. This responsibility terminates when the child turns 18. The guardian of the person and the guardian of the estate can be the same person.
Having the Guidance of an Experienced Orange County, CA Estate Attorney
If you are crafting an estate plan while your children are still young, it is critical to consider how that money will be managed should you die. At the Law Offices of Roshni T. Desai and help. Our Orange County, CA estate planning attorneys have dedicated our careers to ensuring the future of our clients and their loved ones. Call us at 714.694.1200 or contact us online to schedule a free consultation to discuss your estate planning needs.