If you plan to leave part of your estate to a minor beneficiary, there are several legal and financial considerations to keep in mind. In the eyes of the law, anyone under the age of 18 lacks the life experience, maturity, and decision-making skills to own and manage property and other assets for themselves, leaving them open to exploitation and potential losses from mismanagement and poor decisions. 

Inheriting assets directly could also impact a minor’s eligibility for some government benefits, such as Supplemental Security Income and Medicaid. These benefits have specific income limits, and assets in a minor’s name might push them over those limits, thus disqualifying them.

So what happens if a minor beneficiary inherits property or assets? If there is no other plan in place, a probate court would likely step in to appoint a guardian to manage the minor’s inheritance until they come of age. The probate process can be intrusive, time-consuming, and expensive, so it’s a good idea to take steps now to provide for your beneficiaries and protect their best interests, even if they are minors. 

Careful estate planning is key to ensuring that your wishes for the distribution of your assets  to your beneficiaries are followed after your death or if you become incapacitated. The most common approach for safely arranging to leave an inheritance for minor beneficiaries is by setting up a trust. Below, you’ll find descriptions of different types of trusts that might work for you and your family.

Setting Up a Trust

When you create a trust in your estate plan, the trust itself becomes the legal entity that holds the assets, rather than your minor beneficiary. In most cases, you will also designate a trusted individual, known as a trustee, to manage and distribute the assets on behalf of your beneficiary until they reach an appropriate age. 

Types of Trusts

There are a few different types of trusts to consider.

• Living, or revocable living trust – parents maintain control over the assets throughout their lifetime, which allows them to make modifications as needed for different circumstances.
• Irrevocable trust – ownership of assets immediately transfers to the trust and no alterations can be made. Although not as flexible, this type of trust does have some tax benefits and also might provide better protection of the assets involved.
• Special needs trust – for minors with special needs, this type of trust protects their best interests, provides for their future needs, and also helps them maintain eligibility for much-needed government benefits.

Talk to an Estate Planning Professional

Of course, you want what’s best for your family both now and in the future. If you haven’t made an estate plan yet, it’s important to get started as soon as possible. If you do have an estate plan in place, it’s a good idea to review and update it on a regular basis with the help of an estate planning attorney.

The Estate Planning Group at Lonich Patton Ehrlich Policastri has significant experience in the full range of legal services related to estate planning: drawing up wills, revocable living trusts, special needs trusts, administration of trusts, litigation, probate, etc. Don’t leave your family’s future to chance. Call us today at (408) 553-0801 to set up a free, no-obligation consultation to go over your estate planning needs.

Disclaimer: this article does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.