When you are planning your estate and you are leaving an inheritance to a minor, you have to designate someone to manage the assets until they reach the age of majority. There are a few different ways to proceed, and we will look at them here.
Revocable Living Trust
A revocable living trust is a very effective estate planning tool that is quite versatile. It can be the ideal estate plan centerpiece for many people if the beneficiary will not be a minor, and it can also be used to provide an inheritance to a minor.
When you are living, you would be the trustee, and you would name a trustee to manage the trust after your passing. This individual would be empowered to administer the trust on behalf of the beneficiary whether they are a minor or not.
You can dictate the terms of the distributions when you are drawing up the trust declaration. In addition, the transfers are not subject to the legal process of probate.
Testamentary Trust
Another possibility is a testamentary trust, which is a trust that is held within a will. It would be funded after your passing, and the trustee that is named would administer the trust on behalf of the minor child.
UTMA and UGMA Accounts
The Uniform Transfers to Minors Act (UTMA) and the Uniform Gifts to Minors Act (UGMA) are two similar laws that provide a way for people to transfer assets, such as money or property, to minors (children under the age of 18) without the need to create a formal trust. These laws were created to make it easier for individuals to make gifts to minors and to provide a simple way for minors to inherit property.
Under the UTMA and UGMA, a person (called the “transferor”) can transfer assets to a minor (called the “donee”) by opening a UTMA or UGMA account in the minor’s name. The transferor can then transfer assets, such as cash, securities, or real estate, into the account. The assets are held in the account until the minor reaches the age of majority, which is usually 18 or 21 depending on the state. At that time, the minor can take control of the assets and use them as they see fit.
One of the main advantages of using a UTMA or UGMA account is that it allows the transferor to retain control over the assets until the minor reaches the age of majority. The transferor can specify how the assets in the account should be used and can designate a custodian to manage the assets on behalf of the minor.
There are some differences between the UTMA and UGMA. The UTMA allows for the transfer of any type of property, including real estate, patents, and copyrights, while the UGMA is limited to the transfer of securities and cash. Additionally, the UTMA allows the minor to take control of the assets at a later age than the UGMA. In Tennessee, the age is 18 for a UGMA account and it is 21 for a UTMA account.
Overall, the UTMA and UGMA provide a simple and flexible way for individuals to transfer assets to minors.
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If you have already learned enough to know that you should work with a Memphis, TN estate planning attorney to put a plan in place, there is no time like the present. You can send us a message to request a consultation appointment, and we can be reached by phone at 901-763-2500 or 866-997-6325.
At Mendelson Law Firm, Mr. Wachtel focuses on Litigation (Business Litigation, Insurance Defense, Commercial Collections, Subrogation, Landlord/Tenant, Automobile Litigation, etc.), Probate and Estate Planning (Wills, Estates, Trusts, Powers of Attorney).
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