Child Heirs: Bequeathing to Minors

Bequeathing assets to child heirs can have its share of complications. But there are some steps you can take to ensure minors will get any assets you bequeath to them.

There are alternatives to bequeathing to minor children in your will, but you should base your strategy on what's in your estate and how you want to leave assets to your intended child heirs—or other minors. With proper preparation, you'll have several choices to pick from when leaving your assets to minors.

How can you leave your estate to minors?

If you're the testator—the person who owns the estate—and you want to leave some of your assets to your minor children or to minor grandchildren, nieces, or nephews, there are several choices you can make to accomplish this. Keep in mind, though, child heirs cannot inherit from your estate outright until they are of the age of majority, which is 18 in most states, and 19 or 21 in a few others.

Some of the best ways to leave your assets to minors to ensure they get them in the future include:

• Bequeathing your assets in your will
• Creating a trust in your will
• Creating a separate revocable trust, which avoids probate

Other ways to leave assets to minors that also avoid probate are:

• Creating payable on death accounts such as savings, checking, stocks, and bonds
• Listing the minors as beneficiaries of IRAs and pensions
• Listing the minors as beneficiaries of life insurance policies

Bequeathing to minors in your will

If you bequeath assets to your children in your will, and you pass away while the children are still minors, they will need a conservator or a guardian of the property to manage the assets. If you don't appoint a conservator for minor children, the court will.

For this reason, it's always a good idea to name a conservator in your will if you're bequeathing property to your minor children. This way, you won't have to worry about a court-appointed conservator. Make sure you trust the conservator because their role is important.

When the children reach the age of majority, they will inherit all the assets you've left for them. If you think the children could be irresponsible with assets at that age, leaving the assets in a will is not the best way to leave your property to minors.

Creating a trust in your will

Another way to bequeath property to minors is to create a trust for them in your will, known as a "testamentary trust." The trust isn't funded until after you pass on, but you can use your will to state how you want to fund your trust.

A testamentary trust must go through probate court, but you can specify in your will who you want to act as trustee of the testamentary trust. You can also specify when the child heirs receive the trust assets. This prevents them from receiving them until they're more mature.

A testamentary trust is inexpensive to set up because it's listed in your will but it can't take effect during your lifetime. You can set up a testamentary trust for each child heir or, alternatively, a testamentary "pot trust," where the trustee you choose decides how much each child inherits.

Creating a revocable trust for minors

A better way to leave assets to minors is to set up a revocable trust for them. A trust is private, unlike a will. You can set up exactly when you want the child heirs to inherit your assets, whether that's when they turn 30 or graduate from college.

Make sure you pick a trustworthy trustee—or successor trustee if you're the trustee until you pass. While a trust is more expensive to set up than bequeathing assets in a will, it's worth it because it avoids probate. If the children have already met the age or event requirements upon your passing, they can receive the assets from the trust immediately after you pass.

Creating payable on death accounts

You can list minors as beneficiaries of life insurance policies, IRAs, and pension plans if you'd like. Make sure you name a property custodian for minors, otherwise a court will have to appoint someone.

You can also list the trustee of a revocable trust as the person who will monitor the proceeds from each payable on death account. Your estate attorney can help you ensure that your payable on death accounts become part of your trust, or that you've properly named someone to monitor them for your minor heirs.

You have lots of options when it comes to leaving your assets to minors, but it's important to have your estate set up properly so your heirs won't have to jump through hoops to inherit from you. Wills, trusts, and payable on death accounts are all valuable in estate planning, even when it comes to minors. Preparing your estate properly will give you peace of mind in knowing that you've done everything to ensure that your heirs will inherit your assets without complications.