What happens when a minor child inherits money?
When a minor child inherits money, the money will usually be placed into a trust or custodial account until they reach the age of majority, which is typically 18 years old in most states. The specifics of how the money is managed will depend on state law and the terms of the will or other legal document that governs the inheritance. As minors, children are not able to handle their own legal and financial affairs, so their inheritance must be taken care of for them. This can be accomplished through a trust or custodial account, or depending on the minor’s circumstances, a conservatorship may also be created.
Conservatorships & Restricted Accounts
In most cases, the court will appoint a conservator to manage the money on behalf of the child until they reach the age of majority. The conservator is responsible for managing the money prudently and using it for the child’s benefit, such as for education, healthcare, or other needs. In some cases, the court may require that the money be held in a restricted account, such as a Uniform Transfers to Minors Act (UTMA) account or a 529 plan, until the child reaches the age of majority. These types of accounts have specific rules regarding how the money can be used and when it can be accessed.
In other cases, the conservator may choose to create a restricted account until the child reaches the age of majority. This account would essentially be “locked,” and would be untouchable, unless otherwise approved by the court, until the minor reached the age of majority and sought for it to be unrestricted by the court.
However, inheriting a significant amount of money as a minor can have both financial and emotional implications. Without proper planning, if your child inherits money, the probate court will appoint a professional conservator over your minor child’s finances. To better protect a minor child, you might consider holding their money in a trust instead.
A trust can have specific rules for how the money can be used and at what age your child can receive money. Many people prefer to delay the distribution of the money until the child is older than 18, as 18 is the default age of majority. How responsible were you when you were 18? A trust can avoid defaulting that age and further protect the minor’s assets for future and more responsible use. For example, you may want to distribute the money outright to the child when they are 25. Before they reach that age, the trustee that you select will be in charge of how the money is spent, such as for health, education, or the child’s general benefit and support.
If you’re interested in learning more about how a trust can protect your family, contact Windrose Law Center at 602-457-1846 today, where our trusted and experienced attorneys can assist you and your family’s needs.