Leaving Your Money or Estate to a Minor – What You Need to Know

A primary function of estate planning for parents or guardians of young children is to ensure that their children will be cared for by a trusted adult. But, there’s more to raising children than love and guidance – there’s also financial support.

For two parent households the thought is usually to make your spouse the primary beneficiary to the estate allotted for the care of minor children. The intention being that they will be caring for and raising the children in your absence.

For many single parents and guardians the thought is often to leave an inheritance directly to the children, which in some cases can be a costly mistake.

Whenever the court steps in to help control the assets of inheriting minor children, each decision the court participates in will have fees for the service attached. These fees can add up quickly, especially if your children inherit young and have many years left until adulthood.

You can avoid costly court fees eating away at the assets you leave to your children with simple planning.

Read on to learn what you need to know and consider as you create your will and plan to name children as either primary or secondary beneficiaries.

  • The legal age of an adult in your state of residence
  • The age which you would like your children to be when they take control of their inherited assets
  • What kind of assets you’re leaving to your children

What age is considered an adult where you live?

It’s a common misconception that the legal age of adulthood is 18 years old. While that’s often the case, it’s not that way in every state. The age of adulthood, also known as the “age of majority”, varies from 18 to 21, and some states even consider early graduation from high school as an equivalent.

What age do you want your children to be when they take control?

The age the state considers a person an adult is not necessarily the same age you’d like your child to be when they take control of a considerable asset. For many people, 25 or older seems more appropriate; based on maturity and life experience, than what’s considered a legal adult in most states.

If you want to decide the age at which your child will take control of remaining assets – and it’s older than the age of majority (legal adult) – you’ll want to set up a trust.

If you are alright with your child taking control at the age of majority designated by your state, you can simply name a custodian along with your beneficiaries in your policy documents.

What kind of assets are you leaving?

Whether you leave property, financial accounts, or liquid funds, you’ll want to appoint a trusted adult to manage them until your children are able to take control. For property, it’s usually as simple as naming a “property guardian” in your will. For financial accounts, or assets like an insurance policy, it’s best to set up a trust or name a custodian in the policy.

If you have financial accounts invested with a trusted advisor or institution, you can also request that while your named custodian has final say based on the necessity of caring for your children, the accounts remain invested with the advising institution whenever possible.