There are multiple asset transfer methods used in the field of estate planning, and sometimes the same one will be appropriate for everyone in the family. This being stated, there are other situations that call for targeted solutions based on the circumstances.
Estate planning for minors would fit into this category. You cannot leave a direct inheritance to someone that is not old enough to handle their affairs, but you may have a youngster on your list.
This can apply to a grandparent, a great-grandparent, or another older relative. At the same time, parents of dependent children should make sure that their loved ones are provided for if the unthinkable was to take place.
In this post, we will look at a couple of different ways that you can dedicate resources for a minor heir.
Testamentary Trust
If you are going to use a will to direct asset transfers after you are gone, you could include a testamentary trust. This is a trust that is contained within a will, and it would not become active until you pass away.
To provide an example of how this type of trust can be used, let’s say that you are the parent of a young child, and you have an insurance policy on your own life. You could make the trustee of a testamentary trust the beneficiary of the insurance policy.
After your passing, the executor that you name in the will would have a fiduciary duty to establish the trust and follow all of your instructions. The executor and the trustee could be the same person, but this is not an absolute requirement.
Aside from minor children, these trusts are sometimes used by people that are providing for loved ones that are relying on need-based government benefits. Insurance proceeds are one way to fund the trust, but assets that are in your possession could alternately be conveyed into a testamentary trust.
Custodial Accounts
The Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) are a couple of legislative measures that allow for the creation of custodial accounts for minors. You contribute into the account when you are living to accumulate resources for the beneficiary.
While they are minors, a custodian that you name would manage the account on their behalf. When they reach the age of majority, they would assume control of the account.
What’s the difference between the two different types of custodial accounts? A UGMA account will hold stocks, bonds, and mutual funds, so the arrangement is akin to the holdings in an individual retirement account.
The account that can be established under the Uniform Transfers to Minors Account can hold other types of property as well, like real estate and other tangible valuables.
In Connecticut where we practice, the age of majority is 21 for both types of accounts.
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Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.