Leaving Assets To a Minor Can Be Tricky

Samuel Johnson once said, “Hell is paved with good intentions.”

He might have been talking about what can sometimes happen when people seek to leave assets to minor children, as was pointed out on the website estateplanning.com.

“Every parent wants to make sure their children are provided for in the event something happens to them while the children are still minors,” according to the article “Grandparents, aunts, uncles and other relatives often want to leave some of their assets to young children, too. But good intentions and poor planning often have unintended results.

“For example, many parents think if they name a guardian for their minor children in their wills and something happens to them, the named person will automatically be able to use the inheritance to take care of the children. But that’s not what happens. When the will is probated, the court will appoint a guardian to raise the child; usually this is the person named by the parents. But the court, not the guardian, will control the inheritance until the child reaches legal age, 18 or 21. At that time, the child will receive the entire inheritance. Most parents would prefer that their children inherit at a later age, but with a simple will, you have no choice; once the child attains the age of majority the court must distribute the entire inheritance in one lump sum.”

A better option, the site states, than relying on the courts is establishing a trust within a will and naming a trusted individual to manage the inheritance for the child.

“You can also decide when the children will inherit,” the site states. “But the trust cannot be funded until the will has been probated, and that can take precious time and could reduce the assets. If you become incapacitated, this trust does not go into effect, because a will cannot go into effect until after you die.

“Another option is a revocable living trust, the preferred option for many parents and grandparents. The person(s) you select, not the court, will be able to manage the inheritance for your minor children or grandchildren until they reach the age(s) you want them to inherit—even if you become incapacitated. Each child’s needs and circumstances can be accommodated, just as you would do. And assets that remain in the trust are protected from the courts, irresponsible spending and creditors, even divorce proceedings.”