Common Myths About Wills & Estate Planning
Bequests and Gifts to Minors
If you are providing for children or grandchildren under 18 years of age, you should never leave them a gift or bequest in their own name. This rule applies not just to bequests in your will but also listing minors on beneficiary forms for life insurance, investment accounts and qualified plans (IRA, 401(k), pensions). One significant problem with leaving a bequest to a minor is that the court will require that a guardian be appointed to hold and manage that minor’s bequest until the age of 18. You will not be in control of who the court appoints as the guardian and the proceeding will likely cost between $2,000 and $5,000.
Another big problem is that you may not want the minor to have complete control of the bequest at age 18. Perhaps the minor is unable to properly manage a large sum of money at that age. In my practice over 23 years, I cannot recall one person who thought it was a good idea to leave money to an 18-year old. Minors who are disabled and receiving assistance such as social security disability and medicare or medicaid require even more specialized planning. I’ll address the particular issues involving gifts to persons with disabilities in a separate post.
A good way to avoid these problems is to include a trust for minors in your Will. Another is to establish a “living trust” (i.e. a trust that is established and funded during your lifetime). These trusts can receive any bequests to minors from a variety of sources. The trustee can hold and manage the money in accordance with your wishes as expressed in the Will or trust document and distribute the money to the child or grandchild when you deem it appropriate. That might be at age 18, 21, 30 or whenever. The trust can release lump sums of money at different ages. There are lots of possibilities.
If you do include a trust in your Will or have a living trust for bequests to minors, it is very important that beneficiary forms for insurance, investment accounts and qualified plans make specific reference to the trust and that bequest you are leaving be paid to the trustee in the event the recipient has not reached the age you deem appropriate for that person to have control of the gift.
The estate planning team at our firm can answer additional questions about gifts to minors and many others about wills, trusts, powers of attorney and your estate. Please feel free to contact Jennifer Bamonte, Esquire or Michael E. Fiffik, Esquire.