Children’s Inheritance? Trustee
Children under the age of 18 can inherit money, although an adult must be appointed by the court to manage the funds. Rather than involve the Court, there are two simple ways to structure a bequest to children: (1) establish a custodial account under the Uniform Transfers to Minors Act (UTMA) or (2) establish a trust for the child.
Under the UTMA option, you choose a trusted friend or family member (a Custodian) to manage property you are leaving to a child. The Custodian will then manage the property until the child reaches age 21, at which time the funds are turned over to your child. While the custodial arrangement is simple, it may place too much money into a child’s hands at a very young age. For that reason, you may want to consider the second option and establish a trust at the time of your death to hold the funds for your children.
In your Will, you name a Trustee to manage and invest the trust property and make distributions to your child for his or her health, maintenance, support, and educational needs. Unlike the custodial arrangement, a trust allows you to distribute the entire trust remainder at any age you desire or to stagger distributions (i.e. one-third of the trust principal at age 25, another portion at age 30 and the balance at age 35). While the funds remain in trust, the Trustee will continue to make distributions for health, support, maintenance, and education. Because the trust may be held until children are out of college and heading in the right direction, the trust is generally the more popular option.
Lastly, it is important to circle back on all of your beneficiary designations once the trusts are established. Often, parents set up trusts and are hopeful that the proceeds of their insurance policies will go into the trust. However, without changing these beneficiaries, you won’t be able to accomplish your goals.
Learn more about Beneficiary Designation