There are some inheritance planning situations that can appear to be challenging on the surface, but if you speak with an attorney, you will inevitably find a solution.
Providing for a minor child would fit into this category, and we will look at two potential courses of action in this post.
Testamentary Trust
A testamentary trust can be simply defined as a trust that is embedded within a will. If you want to provide for a minor child in your estate plan, you could include a testamentary trust in your will.
The trust would not exist while you are living, so you could change the terms at any time. After your passing, the executor that you name in the will would establish a testamentary trust and fund it in accordance with your stated wishes.
Parents will sometimes create testamentary trusts that would be funded with life insurance proceeds. The trustee would be the initial beneficiary of the policy, and the proceeds would be directed into the trust for the benefit of the child.
When can the child directly access the resources? You would answer this question when you establish the trust. They could receive the entire balance in one lump sum when they reach a certain age, or you could arrange for the trustee to distribute limited assets over an extended period of time.
Custodial Accounts
The Uniform Transfers to Minors Act (UTMA) and the Uniform Gifts to Minors Act (UGMA) are two legislative measures that allow for the establishment of custodial accounts for minors.
You can establish and fund either type of account and name a minor as the beneficiary, and they would be able to access the funds when they reach the age of majority.
A UGMA account can only hold the types of asset that would be in an individual retirement account, which would boil down to mutual funds, stocks, cash, and bonds. The UTMA account can hold a broader class of assets, including real estate, art, and other collectibles.
The age at which a minor will take control of the account varies depending on the state and the type of custodial account. In California, it is 18 for both types of accounts.
However, the person that establishes the account for the benefit of a minor can stipulate a different termination age in some states, and California is one of them. You can set a different termination age if you choose to do so, but 25 is the maximum.
Blogs!
We know that people are more likely to take action for the benefit of their loved ones when they understand why estate planning is so important. As a response, we go the extra mile to provide educational resources on this website.
This blog is updated on an ongoing basis, and there are other resources that you can tap into free of charge. One of them is our estate planning worksheet, and you should definitely take the time to go through it if you would like to build on your knowledge.
The written materials are very useful, and we also go the extra mile in another way. We have recorded an on-demand webinar, and you will learn a lot if you view it. There is no charge, and you can visit this page to gain access.
Need Help Now?
If you have learned enough to know that you should work with a Burbank, CA estate planning attorney to put a plan in place, there is no time like the present.
Each situation is unique, and there is no one-size-fits-all estate plan that is right for everyone. We can gain an understanding of your objectives and your family dynamic and help you establish a plan that ideally suits your needs.
You can set the wheels in motion right now if you call us at 818-937-2335, and you can use our contact form if you would prefer to send us a message.
- Parents: Have You Considered a Guardianship Clause? - September 18, 2023
- Inheritance Planning for Minor Children - September 1, 2023
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