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

By Bryan Driscoll, J.D.

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

By Bryan Driscoll, J.D.

It is not required that a lawyer set up a trust account for a minor beneficiary. Since children cannot control assets, a guardian or custodian must take action to protect it. While they cannot own property or hold assets, they can still inherit assets from you. Although there are several ways they can receive an inheritance, this type of estate planning tool provides benefits and protections that other options lack.

Man and young girl looking at phone while making a salad

Minors can inherit assets from a will, an interstate parent or guardian, as a trust beneficiary, or through a payable-on-death account. People often name them in wills and life insurance polices. Whether parents have unexpectedly died young or a grandparent or other relative has named them in a will, it is common for those under a certain age to inherit assets.

Personal Custodial Management

If the value of the inheritance is relatively small, generally under $5,000, a parent or guardian can accept the money on behalf of the recipient. This amount and the process varies by state.

In most circumstances, however, a court releases the inheritance to a parent or guardian provided that they use the inheritance for the benefit of the recipient. For example, the parent could document that they plan to use the inheritance to pay for the minor's schooling costs.

Uniform Transfers to Minors Act

The Uniform Transfers to Minors Act (UTMA), is a law passed by every state laying out a road map for assets and larger inheritances left to minors, which state laws define as those under the age of 18 or 21. The UTMA allows someone to appoint a custodian to manage the assets until they reach adulthood.

You can use the UTMA to hold assets for those under this specific age. A separate account holds the inheritance; it remains in that account until they reach the age of 18 or 21, depending on the state. At that point, you transfer the account to the beneficiary for them to use as they please.

Trust Options

The options are nearly endless here. The catch with a trust is that you must create it before your death. The person giving something away, called the grantor, places assets into it for management by a trustee for the benefit of heirs (e.g., beneficiaries). The assets can be anything from money to real property to even jewelry or furniture. The documentation also specifies how that designated individual should use the assets. For example, if the arrangement contains a sum of money, they should use the funds to support the individual's school and medical needs.

Just like an account under the UTMA, the beneficiary could receive the assets once they reach adulthood. The best way to care for your loved ones is to plan. Trusts aren't the only part of an estate plan, but they are important tools and apply to more than just the wealthy. They are a highly effective way to ensure the people of your choice receive their inheritance. By planning, you can avoid the challenges and mistakes that can come with inheritances given to minors. State laws do vary, so understand your applicable state rules and regulations before creating one.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.