When Your Child Inherits
For many parents, planning to leave their estate to their children is a common practice. There are many things to consider when planning to leave your children an inheritance, but the complexity increases when your child is beneficiary to someone else’s estate. What happens when the minor child becomes an heir, or when the child’s parent (a beneficiary) passes away before the benefactor?
Children can’t legally own property until they become of legal age, even if they inherit. This can be a problem when wills and estate plans are not updated, and when the benefactor (a non-parent) doesn’t understand the complications of leaving an estate to a minor. If this is a situation you see your minor child being in, seeking legal advice to help you plan a course of action to address this in your own will or estate plan is essential.
As recent as 2016, the celebrity deaths of Carrie Fisher and her mother Debbie Reynolds show how relatives can die in close proximity. Although Carrie Fisher had no minor children at the time, this illustrates the likelihood a child could receive an inheritance from an unintended source at an unanticipated time. Planning is crucial for high net worth individuals, those in second marriages, and for those planning to leave their children (especially minor children) an inheritance.
For parents with minor children, having an estate plan for yourself and the other involved parent is important in case you both die in close proximity. Secondly, have a discussion with other relatives that may leave an estate to you or your minor child. Discussing the details of their will and estate plan can be uncomfortable, but relaying the reasons for your concern can make the discussion easier.
In your own will, you have the legal right to determine who will assume responsibility for the management of your assets on your behalf until your child becomes of legal age, or when your will directs the age your estate will pass to your child. However, be advised that with securities and life insurance policies there are additional requirements and paperwork if you choose to name your minor child as a beneficiary.
For minor children who inherit in this unintentional way, the timeline of passing the inheritance can be drawn out and expensive as the case moves through probate. Each state has its own laws regarding passing assets to minors. Planning for your own state’s laws can be beneficial for the time being, and keeping your will and estate documents updated is crucial while your children are minors.
As always, feel free to consult our office on the requirements for transferring assets to your minor children if part of your estate plan or will. Contact us today!
*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser.
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