30 Dec What to Know About Leaving an Inheritance for a Minor Child
With a well-designed estate plan, you can continue to provide for your children after you are gone. However, leaving an inheritance to a minor child is different than leaving an inheritance to an adult. At Phelps Law, we want to help you understand how to create an estate plan that properly protects your children in the event of your death. Continue reading to learn how to use a secure estate plan to leave money to a minor child.
What Is a Minor Child Entitled to When Their Parent Dies?
While it’s never an easy subject to think about, it’s important to understand what happens if you die while your child is still a minor. If you pass away without a will, the probate court will distribute your assets based on the intestate succession laws. Most likely, all of your assets will automatically transfer to your spouse. If your spouse has also passed away, then your child would receive your assets.
In common law marriage states, children are entitled to inherit property from parents who die without a will, even if the parent has a surviving spouse. However, in community property states like Arizona, your surviving spouse would inherit the property instead of your child. Creating a will or trust ensures that your children receive the assets you wish to leave them.
How to Leave Money and Other Assets to a Minor Child
List All of Your Children as Beneficiaries
No matter what ages your children are, it’s important to list all of them as beneficiaries in your will, trust, life insurance, retirement policies, and other relevant accounts. Naming your children individually allows you to leave specific assets and dollar amounts to each child.
You can also name your children as contingent beneficiaries, meaning that certain assets will go to your spouse or to another beneficiary, but would otherwise transfer to your children if the first beneficiary dies or refuses the inheritance.
If you do not name anyone as a beneficiary in your will or on your other accounts, your assets will be subject to probate. Likewise, if you die without creating a will at all, your family will have no control over the distribution of your assets.
Set up a Trust for Each of Your Minor Children
A good way to protect the assets you wish to leave to your children is by putting those assets into trusts. For beneficiaries who are minors, you can name an adult trustee to handle the assets within the trust until your child is old enough to inherit. The trustee should be someone you trust, who will follow the instructions you leave behind and make decisions in your child’s best interests.
If you have adult children, you can simply name them as beneficiaries in order for them to automatically receive the assets. However, if you wish, you can also set up trusts for adult children that restrict them from receiving the assets until they reach a certain age, graduate from college, or meet other requirements.
Name a Custodian in Your Will
While you may have already named a guardian who will care for your minor children when you are gone, it’s also a good idea to name a custodian. A guardian takes care of your minor child’s day-to-day needs, while a custodian manages their financial assets until they come of age.
You can name a custodian under the Uniform Transfers to Minors Act (UTMA). This law allows you to choose someone to manage any property you leave to a child under the age of 21. You can leave custodianship instructions for someone in your will or living trust, and also when naming the beneficiary of your life insurance policy.
Consider Naming a Property Guardian
Another way you can leave property to your minor child is by naming a property guardian in your will. A property guardian manages the property your minor child inherits from you if you don’t set up a trust or custodianship. Once your child turns 18, they will be able to manage the property themselves. You can name one person to be both your child’s physical and property guardian or appoint two different guardians.
Protect Your Child’s Future
Creating and maintaining a sound estate plan will protect your child’s financial future. The estate planning professionals at Phelps LaClair can help you create or update your will, living trust, irrevocable and revocable trusts, and more. We’re happy to answer any questions you have about leaving money and other assets to a minor child. Call 480-892-2488 today to learn more about our estate planning services.