Does a Lawyer Have to Set Up a Trust Account for a Minor Beneficiary?

By Tom Streissguth

It's common for parents to name children as beneficiaries when it comes to wills, trusts and insurance policies. If the parent dies, the minor inherits property, or receives a life insurance payout. States set the laws when it comes to a minor inheriting. In most cases, an adult guardian must manage the assets until the minor reaches legal adulthood. Using a lawyer to set up a trust account is one way, among several, to handle the situation.

It's common for parents to name children as beneficiaries when it comes to wills, trusts and insurance policies. If the parent dies, the minor inherits property, or receives a life insurance payout. States set the laws when it comes to a minor inheriting. In most cases, an adult guardian must manage the assets until the minor reaches legal adulthood. Using a lawyer to set up a trust account is one way, among several, to handle the situation.

Minors and Inheritance

If a will or trust names a minor as a beneficiary, then the will may also name a custodian to manage the bequest on behalf of the minor. If the will or trust does not name a custodian, then the executor, who is the person named in the will to manage the estate, may nominate a custodian. If the deceased died without a will and the court names an administrator to manage the estate and distribute the assets, the administrator can nominate a custodian. Minors can't directly control inherited assets under most circumstances.

Protect your loved ones by a legally binding will. Make a Will Online Now

Uniform Transfers to Minors

Most states have adopted the Uniform Transfers to Minors Act, a law covering accounts that hold assets on behalf of a minor. The UTMA rules allow a parent to appoint a custodian to manage inherited assets until the minor reaches the statutory age of majority set by the state's UTMA law -- which could be 18 or 21. State law also sets out the proper language; for example, in Minnesota, the appointment must be worded, "(custodian name) as custodian for (name of minor) under the Minnesota Uniform Transfers to Minors Act."

Setting Up a Trust

The creator of a trust, known as the grantor, places assets in a trust, and then appoints a trustee to manage those assets according to the terms he sets. A trust can name one or more persons as beneficiaries. For a minor, the trust may direct the trustee to manage the trust assets for the support, medical care and education of the minor until he reaches a certain age. Once the minor reaches the threshold age given in the trust, he would inherit the assets directly as a beneficiary. In the meantime, the trustee must file annual tax returns -- and most state laws require a regular accounting to the beneficiaries if they request one.

Legal Assistance

A lawyer experienced in estates and trusts, or an online legal document provider, can help set up a trust for the benefit of a minor, but state laws on trusts do not require attorney participation. A grantor can draw up a trust without legal assistance, include standard legal language that is available to the public, and then have the trust witnessed and notarized. He does not need to file the trust with a court or state agency, but the trust is not operative until the grantor legally transfers assets into the trust. According to the grantor's wishes, the trust may continue to control the assets, protecting them from careless spending, bankruptcy and legal claims, even after a minor reaches the age of majority. While legal assistance isn't required to set up a trust account for a minor beneficiary, because state laws and requirements vary, seeking legal guidance is often useful and advisable.

Protect your loved ones by a legally binding will. Make a Will Online Now
Legal Age to Inherit

References

Related articles

What Is a Bank Trust Account?

Most banks offer trust accounts as an optional service. In a trust account, a trustee controls funds for the benefit of another party - an individual or a group.The bank trust account is a useful way to convey and control assets on behalf of a third-party owner. One such trust, a Totten trust, allows a trustee to control the assets of an estate, while a real estate trust holds funds for payment of costs associated with a property.

How to Keep Heirs From Getting All the Money at Once

If you die without a last will and testament, state laws of inheritance control who acquires your assets, and your entire estate will be disbursed to them. Individuals named as devisees or beneficiaries in your will generally receive their full share upon probate. However, creating a trust estate during your lifetime or through your will may provide for incremental future distributions to minor children, special needs individuals or to others you designate to inherit.

Advantages of Trust Funds for Children

Establishing a trust fund for your minor children is a way of passing money to them that differs from handing them a gift of money during your life -- or leaving them the money outright in your will. Trust funds enable you to have greater control over how and when the money is disbursed to your child -- and it may also save on taxes and probate costs.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help.

Related articles

Leaving an Estate to Minor Children in Connecticut

Connecticut probate law allows you to leave property to anyone, including minor children. However, a minor child won't ...

What Happens to Your Assets When Minor Children Are the Beneficiaries Under a Will?

Parents often decide to create wills in order to provide for their children after their death. However, there are ...

Do You Have to Live in Florida to Establish a Living Trust in Florida?

In addition to the warm temperatures, Florida has one of the best tax climates in the United States. Florida is one of ...

How to Dissolve a Trust in Court

Setting up a trust allows you to safeguard your funds for certain purposes. For example, you can create a trust that ...

Browse by category