Leaving an inheritance to a child is a little trickier than leaving an inheritance to an adult. After all, if you want to leave money or property to an adult, it can be as simple as saying as much in your will or revocable living trust.
Children, however, can’t take control of money or property they’ve inherited – at least not until they reach adulthood. Until that time, they need someone to manage it for them. And, if you don’t appoint someone to handle the task, then a court will find someone to fill that position.
So, what are some of your options?
Designate a Custodian
If you’re leaving a relatively small amount of money or property to a child, then your best bet may be to designate a custodian for the property under the Uniform Transfers to Minors Act. Using your will or trust, you name the custodian and designate the property to be transferred and held on behalf of the child, and the custodian manages the property until the child reaches legal adulthood, at which time the property is turned over to the child.
Establish a Trust
If you’re leaving a large inheritance, or if you’re concerned about property being released to a child when he or she is still too immature to handle it, then you may want to consider establishing a trust. With a trust, you control exactly how the child’s property is managed, and you specify exactly when the property is handed over to the child.
Under this arrangement, you name a trustee to manage your child’s inheritance according to your instructions, until your child reaches a certain age (or until he or she reaches a certain milestone, like college graduation). Once your child reaches this point, the inheritance is turned over to your child.
Depending on your wishes and your concerns, you can establish a trust that is distributed over a series of stages, or that lasts for your child’s entire lifetime.
A qualified estate planning attorney can help you evaluate your situation and decide which option makes the most sense for you.