New York Estate Planning & Elder Law Blog
Understandably, many clients want to appoint children or grandchildren to receive their assets. Appointing a minor beneficiary directly to an account, however, can present its fair share of challenges. Unfortunately, clients often assume that the estate planning process is complete after they sign a will and trust. These individuals often then name the same individual named in their estate planning documents as the direct beneficiaries of their accounts. Remember, if a designated beneficiary is a minor at the time of an account owner’s death, several undesirable results can occur. This article reviews just some of the most important reasons why you should be careful when appointing a minor beneficiary.
Problems with Naming a Minor
Some substantial reasons exist to dissuade you from naming a minor as the beneficiary of your estate. The most substantial of these problems include the following:
- One substantial challenge involved with naming a minor as a beneficiary is that financial institutes and insurance carriers often hesitate and sometimes refuse to pay a substantial amount of money to a minor. In these situations, these institutes often require lengthy and expensive court proceedings to appoint a guardian who can manage the child’s assets. This guardian also might not be someone that you desire.
- Until your child reaches the age of 18 and the assets can be turned over to him or her, someone else will be required to hold or manage the assets for the child.
- Many times, a minor will have unrestricted access to assets at the age of 18. Unless a minor has special needs, guardianship almost always terminates at age 18 which means at this time the assets will be passed over to the minor. The minor might not spend the assets in the most appropriate manner.
Options Exist to Transfer Assets to Minors
To help make sure that minors have access to assets, there are several techniques to keep in mind which include the following:
- The Uniform Transfers to Minors Act. This is the easiest method to make sure that minors receive proceeds from assets. Under the Act, an adult establishes an account for a minor at a financial institute. A custodian then manages the assets until the minor reaches the appropriate age.
- Create a Trust. Trust provides a great deal of control and discretion over how assets are transferred and used. Trusts can be created to both receive and manage assets for a minor.
- Consider utilizing a property guardian in your will. The individual who is appointed to this position will be responsible for managing assets for the minor until they reach the age of 18. If your estate is deemed substantial enough, a conservator might be required to manage your child’s assets. Provided no additional provisions exist, however, remaining funds will be distributed to your children in one lump sum at the time they reach the age of 18.
Obtain the Assistance of an Experienced Estate Planning Lawyer
Deciding what estate plan works best for you is never an easy process. If you or your loved one needs the assistance of an experienced estate planning attorney, contact Ettinger Law Firm today to schedule a free consultation.