There are many matters to consider when you are planning to leave your estate, whether it is in the thousands or beyond, to a young beneficiary – whether this beneficiary is a child, niece or nephew, godchild, etc. How old is a “young beneficiary”? That ultimately depends upon maturity level, but is generally considered to be someone who is in their 20s or younger.
If assets are left outright to a person who is a minor (under 18), that minor is unable to hold property and a Guardianship with the local probate court must be established. The probate court then oversees how that money is managed and spent on behalf of the minor; the assets are then paid over to the minor upon him or her turning 18, with no strings attached. If assets are left outright to a child over 18, then the holder of the asset is required to pay the asset directly to the child, again with no strings attached.
Younger children receiving assets, no matter their value, generally strikes fear in the heart of my clients. Even the most level headed child or young adult may not be able to manage a large influx of cash or may be susceptible to the influence of their peers.
The means to avoid the mishandling of funds is to establish a trust for your young beneficiary. With a properly drafted trust, you specify the age in which your beneficiary receives their inheritance and you name a Trustee to manage and oversee that inheritance until your child reaches that age. Further, your Trustee has the authority to access the trust funds and use them for your beneficiary’s needs – such as education, healthcare, support, etc.
Establishing a trust is a prudent and wise step to take if you have a young beneficiary. Once this process is complete, you can rest easy knowing that your hard earned nest egg will benefit your beneficiary and not be wasted.