While nobody wants to think about a subject as sensitive as how your loved ones will be cared for after you pass, it is important to establish a plan for how your assets will be distributed in case of an emergency. Leaving your assets to your loved ones helps ensure the future of your family, but it’s important to plan properly if you wish to leave valuable assets to minors. Here, will and estate planning attorney Douglas C. Lauenstein explains the necessary precautions and steps you should take if you plan on leaving assets to a minor.
Leaving Assets in Your Will
Creating a will is crucial for distributing your assets properly and proactively planning for the future of your loved ones. You are able to leave assets in your will to a minor, but this does not necessarily mean that the minor can manage these assets. This is because minors can inherit assets, but are not qualified to manage assets. Instead, you may name a property guardian in your will. The property guardian will be appointed by the court upon your passing to manage the inheritance until the minor becomes of age. Once the minor reaches the age of 18, which is the legal age of inheritance in most cases, they can effectively inherit the assets left to them in your will. In a Maryland will, you can also bequest assets to a minor either via a guardianship or through a Uniform Transfers to Minors Act designation in the will. These bequests can be held until the minor is 21 years of age in Maryland, if so specified.
Transferring Smaller Assets to a Minor
In cases where you want to leave a small amount of money, the money can be left to a minor under a Uniform Transfer to Minors Act (UTMA). These accounts will hold and protect these assets until the recipient reaches the age of majority, which can be 21 in Maryland, if so specified. Some states, including Maryland, will also allow assets to be placed into a 529 account, which is a tax-advantaged savings plan for future college costs. Leaving assets to a minor through these avenues is an effective way to ensure your valuable inheritances are properly transferred to your loved ones and even aid them in financing their higher education pursuits.
Naming Assets in a Trust
Leaving assets to a minor or minors in individual trusts can be beneficial as it allows for more control over your assets after your passing. Through a trust, you can name a trustee who is responsible for managing the inheritance until the beneficiary becomes of age. It is the responsibility of the trustee to act in the best interest of the beneficiary and follow the exact written instructions expressed in the trust. In a trust, you are able to leave exact instructions on what is to be done with the inheritance, including when the beneficiary is to receive it, whether or not the trustee can access the inheritance and any other specific instructions you may outline in your trust. Specifically, there are two types of trusts you can establish in order to leave your assets to a minor: a revocable living trust and testamentary trust.
Setting Up a Revocable Living Trust
A revocable living trust gives you additional control over how the inheritance is to be handled in case you were to become incapacitated. By setting up a revocable living trust, you are able to select one or more guardians to manage the trust, in the event you become incapacitated, rather than allowing the court to have this responsibility.
Setting Up a “Testamentary Trust”
Testamentary trusts also give you additional control over how the inheritance is to be handled in case you were to become incapacitated. If you have multiple children or minors that you wish to leave an inheritance to, you may want to consider setting up a testamentary trust to encompass every individual into one trust. In a testamentary trust, the trustee has the power to give each beneficiary the amount they see fit depending on each beneficiary’s needs. Additionally, the trust does not end until the youngest beneficiary reaches the age you specify. If you don’t want a testamentary trust, you can set up the trust so that each child has their own separate trust in your will. The separate trusts can designate any age for distribution and can include multiple distribution ages. If you have a special needs child, you can also consider a special needs trust for that individual. In general, trusts are more complicated but they are flexible and offer the most protection for a minor.
Speak to Estate Planning Attorney Douglas C. Lauenstein to Learn More
It is important to plan for the future of your family, and that often means leaving assets to children, grandchildren and other minors. Choosing the appropriate method to pass down these assets can be challenging and can vary depending on individual situations. Ensure that your family is taken care of properly after your passing by contacting a trusted estate planning attorney to help you create a detailed estate plan that works in the interest of you and your loved ones. If you are preparing an estate plan and are intending to leave assets to a minor, contact the estate planning attorney Douglas C. Lauenstein today, who has extensive experience in the areas of estate planning, wills and trusts.