Blogs :: Why You Should Never Leave Money Directly to Your Minor Children
(in Texas)
We all want to take care of our children now and in the future when we are not here to provide for them. The temptation is to create a Will that divides your assets with your children as beneficiaries; however, this is not necessarily the best course of action.
In many households, parents divide assets so that their children will get an equal share. Depending on the situation within the family, other parents might skew assets so one child benefits more than another. Your Will can also be set up to exclude a child for whatever reason. The one thing that should not be done is to leave assets to a minor child.
In the State of Texas, minors cannot own property. Should a minor child inherit property, there are legal procedures that can be done after the fact. A better course of action is to talk with your Estate Planning attorney and discuss ways to prevent future issues before they become both problematic and costly for your heirs.
No one likes to consider this scenario, but let's look at what may need to be done should one or more of your children be minors at the time of your death. Years ago, we received a referral client whose husband had just passed away while on a business trip. The family members were expatriates, working in the US for several years. When the husband passed away, a large life insurance settlement was bestowed upon their minor son. The company that held this policy would not let the mother gain access to the funds since the beneficiary was a minor. The choices were to have the financial firm hold the funds until the child turned 18, issue a Guardianship of the Estate, or the young man could receive the inheritance via a UTMA account which would hold the money until he turned 21. Since the wife of the deceased wanted to return to their overseas home, she had some hard choices to make. If the father had left his son's inheritance to a Trust, none of this would have happened.
A Testamentary Trust inside a Will can take care of any inheritance that a child under 18 years old may receive. Specifics about when distributions will occur can be detailed. For example, for children under the age of 18, the trust may pay for typical childhood expenses. From age 18–25,perhaps the trust can pay for college, an apartment, transportation, etc. The trust can then state that at age 25, half the inheritance will be given with the remainder given at age 30. When our children turn 18, they become adults in Texas. In many cases, you may not want your 18-year old child inheriting everything at that age. Also, if you do not have a Testamentary Trust in your Will, since minors can't own property or have bank accounts without a custodian in the State of Texas, should you die before your children turn 18 and leave inheritance to your children without a trust, then during the probate process, the courts will require the establishment of a court-ordered trust or the inheritance may be put in the court's registry until the child turns 18.
A better option for families is to consider having a trust either on the inside or the outside of your Will to avoid complications at the time of your death. Contact our experienced attorney for a consultation to discuss this in greater detail as it pertains to your family's situation.