How to Protect Your Children’s Inheritance
Do you plan on leaving your child an inheritance? There is no rule saying minors cannot be beneficiaries. However, until your child turns 18 years old, they cannot technically inherit property in their name. Instead, the property must be managed by an adult until the child is old enough to manage it themselves. Until the child comes of age, their inheritance can be held securely through a number of mechanisms. One popular way is to leave the property or money in a trust fund. It can also be left to your child under a guardianship approved by the court, or under the North Carolina Uniform Transfer to Minors Act.
If you plan to leave an inheritance to your child but have questions about how to set it up or the legalities of the matter, it is wise to reach out to an estate planning attorney. If you are new to the game, the attorneys at Arnold & Smith, PLLC can help walk you through the process.Trusts: What to Know
Trusts are one of the most widely used methods of passing down an inheritance to a child. Why? For starters, trusts are easy to control. Parents can decide when funds can be distributed and for what they can be used. For example, if a parent wants a chunk of the funds to be spent on college and nothing else, they can write that into the trust. Until the child comes of age, the trust is typically managed by a trustee. That trustee is responsible for managing and distributing the funds in accordance with the instructions laid out in the trust. All in all, trusts are a useful mechanism to ensure that your child uses their inheritance in accordance with your wishes rather than wasting away the money.
Trusts are also popular choices because the assets do not have to undergo the lengthy and costly probate process. Trusts can also be extended beyond the time your child turns 18, allowing you to ensure your adult child does not mismanage their inheritance.North Carolina Uniform Transfer to Minors Act (NCUTMA): What to Know
Under the North Carolina Uniform Transfer to Minors Act, you can leave an inheritance to a child. Typically, the inheritance is placed in a custodial account to be managed by the account custodian. This person is appointed to manage the inheritance, which is often kept safe at a bank, credit union, or other type of financial institution. The inheritance is typically held until the child comes of age, either at 18 or 21 years. Before the child comes of age, the account custodian can spend the money on the child for the child’s benefit. When the child comes of age, any remaining money is distributed to the child.Guardianship: What to Know
If a trust is not set up and arrangements were not made under the North Carolina Uniform Transfer to Minors Act, then a guardianship, supervised by the court, has to be established. A person seeking guardianship must first apply for the position with the court, and once approved, that person will assume guardianship of the inheritance. It will be the guardian’s job to look after the money or property until turns 18 years old. Each year, the guardian will have to submit an accounting report to the court to ensure they have been managing the inheritance correctly and legally. If the guardian ever wants to spend money from the inheritance on the child or sell assets included in the inheritance, they will have to get court approval. As soon as the child turns 18, the inheritance and assets will pass to them.
If you have an inheritance or property you plan to pass to a child, it is important to set up something like a trust, will, guardianship, or an agreement under the North Carolina Uniform Transfer to Minors Act. These popular methods of management will help keep the inheritance safe until the child reaches adulthood. Without a proper management system in place, there is no guarantee the inheritance will still be there when the child comes of age.
If you have questions about setting up a trust or anything else, the team at Arnold & Smith, PLLC can help. We understand the importance of estate planning and are passionate about helping families like yours set up a plan that will best meet your needs. Give our offices in Charlotte, Mooresville, or Monroe, North Carolina a call for a consultation so that we can determine how best to set up an inheritance plan for your child.