Protecting your precious assets....
AT WHAT AGE DO YOU WANT YOUR MINOR CHILD TO HAVE ACCESS TO HIS OR HER INHERITANCE?
Parents have the right to appoint someone to be responsible for the daily care of their children, referred to as a Guardian of the Person.
Parents, grandparents and others have the right to give property to a minor child. Individuals routinely name a minor child as a beneficiary on beneficiary forms or in their wills without understanding the consequences.
In most states, the law does not allow minor children to own and manage assets. Naming your child or grandchild as a designated beneficiary on a beneficiary form or in your will usually means the probate courts must become involved in the management of their inheritance until the child becomes an adult. In addition, giving money directly to a child with “special needs” may impact their ability to receive government benefits.
- Who do you want to manage your children’s daily care when you die or if you become incapacitated?
- At what age do you want your minor children to access their inheritance?
- What if your children have special needs?
What if you think of your pets as your children?
Q. Who do you want to manage your children’s daily care when you die or if you become incapacitated?
A. You have the right to nominate a guardian of the person to take personal care of your minor children.
The guardian of the person has day-to-day responsibility for your children, assuming the role of a substitute parent. When you die, someone must petition the court to be appointed as the guardian of the person. The court will normally defer to the person you nominate as the guardian of the person.
If you don’t nominate a guardian of the person, the court will do it for you, according to state rules of preferences. A surviving parent usually comes first, followed by grandparents if neither parent is alive.
Fact: Surviving parent rights.
If one parent dies, the surviving parent continues to have the right to take personal care of minor children.
When a divorce or single parent dies, the court generally appoints the surviving parent as guardian of the person for a minor or disabled child, even if the deceased parent would have been opposed to that.
Q. What age would you want a minor child to gain control of their inheritance?
A. There are three ways you can give property to a minor child. You can set up a trust. You can name a guardian in your will. You can name a custodian.
Choice #1: Trusts for Children
You can include instructions in your living trust or a testamentary trust in your will establishing a new trust for your minor children when you die.
You can specify what assets you want transferred to the trust to be used for the benefit of your minor children
You can name a trustee to manage these assets for your children, either an individual or a financial institution
There is no requirement for the probate courts to be involved in the management of trust assets
Unlike state laws which give inherited probate property to minors when they reach age 18 your trust can include instructions about the age at which you want the children to inherit the property, e.g., one half at age 25 and the remainder at age 35.
If you become mentally incompetent, your living trust can give the trustee the right to manage trust assets for your minor children.
Choice #2: Custodianship
A law known as the Uniform Transfers to Minors Act (UTMA) allows you to name an adult custodian to manage specific accounts that will be held for the benefit of a minor child until the minor child is considered an adult. You can name a custodian in your will, your living trust or on beneficiary forms.
No court process is required to approve the custodian.
No court supervision of the custodian is required
State laws determine what types of property can be owned in a custodial account.
Q. How do you designate a custodian on beneficiary form?
A. If you want “John Jones,” your minor child, to get the proceeds of a life insurance policy, you would fill out the beneficiary designation like this: “Mike Smith, as custodian for John Jones under the Uniform Transfer to Minors Act.” If you die or become incapacitated before John becomes an adult, Mike, the designated custodian, manages the account until John reaches the age at which state laws considers him or her to be an adult.
Q. How do you designate a custodian in your will?
A. If you want “Allison Astor”, a minor child, to be a beneficiary in your will, you would fill out the beneficiary instructions like this: “All property I leave by my will to Allison Astor shall be given to her mother, Kim Astor, as custodian for Allison Astor under the Uniform Transfer to Minors Act of California.”
Choice #3: Guardian of the estate Designated In Your Will
Q. How do you appoint someone to manage property on behalf of a minor child in your will?
A. If you have a will, you have the right to nominate a person or a financial institution a the guardian of the estate for our minor children. When you die, the guardian will file papers with the court requesting approval of our nominee. Once appointed by the courts, the guardian of the estate will assume financial control of the child’s bequest and manage it for the benefit of the child.
Most courts require the guardian of the estate to purchase a surety bond as part of the guardianship process.
Most state laws terminate the guardianship of the estate when the minor becomes a legal adult (turns 18 or 21) at which time the funds are given over to the child
The guardian of the estate will be required to file annual reports with the courts, which become public records and are available for public access. The actions of the guardian may be subject to court review and may restrict how the guardian can use the funds for the benefit of a minor child.
Q What is the disadvantage of using a will to name a guardian of the estate for a minor child?
A. When you name a minor child as a beneficiary, some states set limits on the amount of money a guardian of the estate can manage on behalf of a minor child. If the amount of inheritance exceeds state limits, some states require a separate court procedure, sometimes referred to as a conservatorship. The conservator will be required to report on a regular basis how he manages and spends the child’s inheritance. For a fee.
The court appointed conservator becomes responsible for deciding how to invest and spend the money left to the minor child, not the guardian you named. Their choices may be dictated by state statutes.
Using California as an example:
- If a minor inherits $5K or less, his parent may hold the inheritance money and/or property in trust for the benefit of the minor until he or she reaches the age of 18.
- If the minor inherits more than $5k but not more than $20K the court has discretion to hold the money on any condition it determines to be in the best interest of the minor.
- If a minor inherits more than $20K, the court may:
- Order a guardian of the estate to be appointed so that the money is deposited with the guardian.
- Order the money to be deposited in an insured account
- Order the money to be transferred in whole or in part to a custodian account in compliance with the California Uniform Transfers to Minor Account and order the money to be deposited with the country treasurer.
Q. What if you have a child with special needs?
A. Consider a type of trust referred to as a special needs trust. A special needs trust is a trust that provides for children with special needs but does not cause them to become ineligible for certain government benefits such as SSI and Medicaid. The laws concerning eligibility are complex and changing. Because of this, you should seek the help of a competent lawyer.
Q. What if you think of your pets as your children
A. If you love your pets, plan for their existence after you are gone. An estimated 500,000 pets are euthanized each year because no plans were made for them in the event of their owner’s death or long-term illness.
You generally cannot make a gift of money or other property to a pet in a will or living trust. The law considers a pet to be property and one piece of property cannot hold title to another piece of property. Language giving gifts directly to pets is not going to be enforced by the courts.
What you can do is designates someone you trust to take responsibility for your pets when you die or if you become so incapacitated you can’t care for them. You can also give money, either outright or in trust, to this person. Although the money is to be used for the care of your pets, the courts have no way to enforce these terms if you simply give the money outright.
Q. What is a pet trust?
A. Some states have trust laws which allow a trust to be set up for “the care of a designated domestic or pet animal.” The trustee is prohibited from using any of the principal or income of the trust for anything other than the welfare of the designated animal. Just as important, state laws have made the terms of the trust enforceable.
The pet owner can designate a person with the power to enforce the trust, that is, to make certain the trustee is using the principal and income for the benefit of the pet. If the pet owner does not name a trust enforcer, any individual may ask the court to appoint a court enforcer.
The trust terminates when no living animal is covered by the trust. The instructions in the trust should state who inherits the property when the pet dies.
Other states allow a Pet Trust to be established, but the court will not enforce it. If you select the caregiver wisely you will have some assurance that the pet will receive proper care. However, the effectiveness of this arrangement turns on the reliability of the person you choose; no mechanism exists to force the caregiver to use the property for the benefit of the pet.
A large amount of money or other property left to the pet trust may cause your heirs to challenge the bequest and the court to reduce it. The trust should state how you want the funds paid and whether the caretaker should be paid for his or her services.
If you want to set up a trust for your pets, it is better to do it while you are alive so that your pets will be immediately taken care of when you die, rather than a testamentary trust. You should also fund the trust so money is available without delay. If you wish to stipulate how you want your pet buried, be sure to include these instructions within the trust.
Other states permit the establishment o pet trusts but do not require the courts to enforce their provisions.
If your state does not allow pet trusts, ou should consider finding someone willing to take care of your animals when you die. You should include the identification of this person and the pets in your will or living trust. You can decide whether you want to leave money to this person for the care of your pets. There may be no legal supervision to assure that this person will take care of your pets or spend the money on the pets.
If you don’t have someone willing to take care of your pets, you can consider giving your pets to a sanctuary when you die. For a set fee, the sanctuary agrees to take care of your animals during their lifetime. Many sanctuaries are connected to schools of veterinary medicine and some veterinarians are establishing animal sanctuaries.