Protecting a Child's Inheritance in North Carolina
Do you have property, money, or other assets you plan to leave to your children when you pass? While there are no rules in North Carolina saying minors cannot be beneficiaries, they cannot technically inherit property and other assets in their name until they turn 18 years old. So, what happens if you pass away before your child comes of age? Well, there are a few options available that you can take now to plan for the future, including setting up a trust or guardianship. You can also rely on the North Carolina Uniform Transfer of Minors Act to help keep your child’s inheritance safe in the event of your untimely passing.
If you are unfamiliar with how to set any of these up, the team at Arnold & Smith, PLLC can help. We understand that many parents have questions about which option would be best for their unique situation. To get started, it is best to know the difference between the various options available to you.What to Know About Trusts
One of the most popular ways to pass money, land, and other assets on to your children is to set up a trust. Not only can trusts bypass the lengthy and costly probate process that comes attached to other options, but trusts are easy to control. When setting up a trust, parents can leave instructions for when the funds can be distributed and how those funds can be spent.
For example, if a child is set to receive a trust fund when they turn 18, you can include instructions in the trust document that requires a portion of the funds to be spent solely on college tuition. Including instructions of this nature will ensure that the only thing that designated portion of funds can be spent on is college tuition. A parent can also leave instructions staggering the distribution of the funds instead of handing a lump sum over to their child when they turn 18.
Until the child comes of age, most trusts are managed by a trustee. Trustees are people chosen by the parent(s) and are responsible for managing and distributing the funds according to the instructions laid out in the trust.What to Know About the North Carolina Uniform Transfer to Minors Act (NCUTMA)
Anyone can pass down an inheritance to a minor, under the North Carolina Uniform Transfer to Minors Act. But what is the NCUTMA? For starters, it is a law that allows anyone to place an inheritance, whether it is property or money, into a custodial account managed by an account custodian. The account custodian is chosen by the person passing down the inheritance and is responsible for managing the account. The account is often kept safe and secure at a bank or other financial institution until the child comes of age. Until then, any money in the account can be spent on the child for their benefit, whether for food, clothing, or other necessities. The remaining amount is distributed to the child when they come of age.What to Know About Guardianship
If there is no trust set up or arrangements made under the North Carolina Uniform Transfer to Minors Act, then a guardianship, supervised by the court, will be set up. Once a person is appointed to be the guardian, it will be their responsibility to look after the money, property, or other assets until the child matures and turns 18. Until then, the guardian will have to submit an accounting report to the court as a way to make sure the inheritance is being managed legally and honestly.
If the guardian ever wants to spend inheritance funds on the child, they must generally first get court approval. As soon as the child comes of age, the inheritance will be distributed to them.
If you plan to leave an inheritance to your child, now may be a good time to set up a trust, guardianship or an arrangement under the North Carolina Uniform Transfer to Minors Act. These options are designed to help keep your inheritance safe until your child matures. Without such plans in place, there is no way to guarantee your inheritance will still be there when your child grows up.
If you are interested in setting up a trust or have questions about estate planning in general, the team at Arnold & Smith, PLLC would like to help. Schedule your initial consultation at our Charlotte, Mooresville, or Monroe office today.