A common misconception that clients often have is that a child can directly inherit property. Until an individual reaches the age of majority, which in California is 18, that person cannot inherit property in their own name. Instead, an adult must be appointed as the custodian of the property and manage it until the child reaches the age of majority and can be responsible for the property themselves. Our Los Angeles estate planning lawyers can answer your questions about estate planning for minors.
How can my minor child inherit property?
There are several different ways that a minor child can inherit property. A child can be named as a beneficiary in a will or trust or they can receive a gift from the estate of a loved one, after that person’s death. Also, a child can be named the beneficiary of a retirement account or life insurance policy. Our Los Angeles estate planning lawyers can discuss your options with you.
If a child inherits through a trust, the trustee will be responsible for supervising the child’s inheritance but must comply with the terms of the trust. The only other method is for the inherited property to be placed in a custodial account until the child becomes an adult. This is done pursuant to the Uniform Transfers to Minors Act. In those cases, the court appoints a guardian over the inherited property who will manage the property until the child becomes an adult.
Naming a child as a trust beneficiary
When a child is named as a trust beneficiary, the trustee will have some specific responsibilities. First, the trustee is must obtain a tax identification number for the trust in order to open a bank account or brokerage account. The account must be opened in the name of the trust, for the benefit of the child. Once that has been accomplished, the trust assets will be distributed to the child, by the trustee, in the manner provided by the trust agreement.
Typical trust terms relating to a child beneficiary
There are many different situations that can arise when a child receives an inheritance through a trust. For example, a trust could include terms that the trust assets will be distributed to the child once she reaches the age of 24. Until that condition is met, the trustee can be given the power to use the trust funds for the child’s “health, education, maintenance, and support.” This is a standard provision including these types of trusts. When the child reaches the established age and the trust ends, the child can then receive and manage their own inheritance.
California’s Uniform Transfers to Minors Act provisions
Every state establishes their own provisions with regard to the Uniform Transfers to Minors Act, including the time limit for a UTMA account which is established through a will or trust. In California, a UTMA account must end before the minor reaches age 18 to 25.
Gifts to minors require a guardianship for the property
When property from an estate is left to a minor and neither a custodial account nor a trust has been created to take control of that property, then the probate court will need to appoint a guardian to manage the property until the child turns 18, the age of majority. The same is true for assets other than cash. For example, if a minor child is named as the beneficiary of a life insurance policy, that child will not be able to inherit the life insurance proceeds until a guardian has been appointed to manage the insurance proceeds until the child reaches the age of majority. The same is true when a parent dies without a will and a minor child inherits the parent’s estate. If there are siblings, the court must appoint a separate guardian for the property belonging to each child who can manage the property for that child until he or she reaches the age of majority.
Being appointed as a guardian over property
A guardian over property is much like a custodian or trustee. They are responsible for properly managing the inheritance for the benefit of the minor. However, unlike a custodian or trustee, the guardianship ends when the child reaches the age of majority because the court no longer has jurisdiction. Also, a guardian over property must file a formal report with the probate court that accounts for exactly how assets have been invested and distributed. On the other hand, custodians and trustees may not have these same requirements.
Join us for a free seminar today! If you have questions regarding estate planning, trust contests, or any other trust administration issues, please contact the Schomer Law Group either online or by calling us in Los Angeles at (310) 337-7696, and in Orange County at (562) 346-3209.
#estateplanning, #schomerlawgroup, #uniformtransferstominorsact
Latest posts by Scott Schomer, Estate Planning Attorney (see all)
- Many Reasons to Plan - July 8, 2019
- Use Resources Efficiently With a Special Needs Trust - July 7, 2019
- Business Structures That Provide Asset Protection - July 6, 2019