It’s important to understand what happens to money you leave to your minor children and how to avoid potential pitfalls.
A Last Will and Testament
- If you leave money to your minor children via your will, a guardian will need to be appointed by the probate court to manage the funds.
- Depending upon the size of the inheritance, the courts may govern how the money ought to be invested.
- When the child becomes an adult, at age 18 or 21 depending upon state rules, the child becomes the owner of all the assets.
A Living Trust or A Testamentary Trust
- If you leave money to your minor children via your trust, your trustee will manage the trust assets for the benefit of your minor children according to the instructions you include in the trust.
- These instructions can include the age at which you want your children to have access and control of the funds. For instance, you can give a child access to 1/3 of their inheritance at age 25, 1/3 at age 30 and 1/3 at age 35.