Protecting A Child’s Inheritance
Protecting your loved ones for the possibility of your eventual passing is a common practice for most families. This is especially important if you have young children. Many times this process is kept simple by purchasing life insurance. Life insurance can insure that your children are financially taken care of in your absence, but how does that work if your children are minors at the time of your passing? Protecting a child’s inheritance is paramount.
Custodians of a Child’s Inheritance
The important part of all of what we are discussing today is that distributions of cash or other valuable property cannot be made directly to minor children. As long as your children are minors they cannot receive lump sums of cash or property upon your passing. A conservator or custodian or trustee will always need to be appointed. You can nominate someone to act as a conservator or custodian or trustee in your Will or a Trust. If no such document exists, or if your Will or Trust does not name a conservator or custodian or trustee for minor children, then the appointment must be made by a Court.
Leaving a Child Property
If you name a custodian in your Will, in the state of Arizona, it is a simple process to transfer property or cash to that custodian under the Uniform Transfer to Minors Act (UTMA); the custodian will hold the cash or property until a minor reaches 21. In cases where a custodian is not designated in a Will or Trust, of if there is no Will or Trust, then a minor child who will inherit over $10,000 in cash or property assets must have a conservator appointed who will manage the cash or property. Your Will can nominate a conservator to manage property for a minor child, if you prefer that to a custodian. A conservator handles cash and property only until a minor becomes 18; then the cash and property are turned over to the young adult. A conservator is subject to court oversight and must report to the court every year regarding the status of the estate including all income received and expenditures made. A Will can also establish a trust for a minor child and appoint a Trustee to handle cash and property which will keep the management of the assets out of Court. Similarly, a Trust can nominate a conservator for minor children or it can provide for a continuing trust for minor children; this will also keep the management of the assets out of Court. A Trust can set up terms to see that cash and property is managed until a child has matured beyond 18 to an age you feel more appropriate (for example until a child is 21 or 25 or even 30); the Trust is not subject to court oversight.
Inheritance to a minor, however, will require that one of these fiduciaries (custodian, conservator or trustee) be in place before distribution can begin. It is important that your Will or Trust direct these actions and appoints someone who you want to be in such a trusted position. Your Will or Trust should be direct and concise concerning all points.
Basic Will forms which provide for the appointment of custodians for minor children can be found at the AZ Legal Form Library, an interactive library provided by Cautela Corporation where you can prepare your own Will on-line; for more complex estate planning, please feel free to contact Cautela Corporation for a consultation.