When a Minor receives Assets –  Minors, i.e., persons under 18 years old, cannot own money or other assets in their own name. What happens when a minor receives a judgement, settlement or an inheritance that would otherwise be payable outright in the minor’s name but for the minority? There are a variety of approaches as to how these assets can be held for the minor’s benefits. Let’s discuss.

Is there a court appointed guardian of the minor’s estate? If yes, then the guardian can receive the net assets that remain after reimbursement to any parent, guardian and attorney for expenses and fees, and can administer them for the minor’s benefit till age 18. Sometimes, however, the guardian may ask the court to transfer some or all of the assets to any one or more combination of the following alternatives: (1) an insured account in California or in a single premium annuity subject to withdrawal upon court order; (2) a special needs trust (if the minor receives SSI/Medi-Cal); (3) a custodian of a minor’s account; or (4) to a trustee of trust approved by the court.

If there is no guardian then then the court may either order that one be appointed and that some or all of the assets be transferred to the guardian or may order that the some or all of the assets be transferred in the same manners discussed herein.

Is money the sole assets of the minor’s guardianship estate? If so and the money does not exceed $20,000 then the guardian may request the court to order that the money be held on any condition that the court determines in its discretion to be in the best interests of the minor.   Thus, the court could allow the minor’s parent hold the money to pay for the necessary living expenses of the child. Also, if the money does not exceed $5,000, the court may order the money be paid to the parent to hold in trust for the minor till the minor reaches age 18. If there are other assets besides money then selling such assets may allow one of these two approaches to be used if the total estate is small enough.

So what happens when some of the money and other assets are transferred into a custodial account? Under California Probate Code, “A custodian may deliver or pay to the minor, or expend for the minor’s benefit, as much of the custodial property as the custodian considers advisable for the use and benefit of the minor … .”   Once the minor turns age 18, or other age (not to exceed 25) as specified in the court order, the custodianship ends and the assets are transferred outright to the minor.

If different terms as to how the assets are to be controlled and used is desired then transferring assets into a court approved and supervised trust offers an alternative.   Such a trust, however, would become revocable by the minor upon reaching 18. When the size of the estate is large enough, say over $100,000, the trust approach may then make more sense.

With respect to inheritances, the preferred approach is that the decedent have an will or a trust that specifies that the assets are to be left to a custodian or a trustee of the decedent’s own choosing. When planning is done before death, the decedent’s testamentary document, be it a trust or a will, can say that the assets can be held in further trust well beyond the beneficiary’s 18th birthday.

“Serving Lake and Mendocino Counties for nineteen years, the Law Office of Dennis Fordham focuses on legacy and estate planning, trust and probate administration, and special needs planning. We are here for you. 870 South Main Street Lakeport, California 95453-4801. Phone: 707-263-3235.”