Even if a parent wants to advance an inheritance to a minor child, the child may not be able to act with respect to the property. Minors can generally own property, but they do not have the power to handle or dispose of the property. This can raise some unique questions as to who can manage property for a minor.

Guardianship

A person can be appointed as a guardian of the person of a minor. The guardian of the person of a minor generally has no authority to deal with the minor’s property.

A person can also be appointed as a guardian of the minor’s property. This type of guardianship does not have to be set up during the decedent’s lifetime in a will or other instrument. The purpose of this type of guardianship is to provide some management of property owned by the minor child. To this end, the guardian can use the income from the assets, but not assets themselves, to support the child.

A guardian for the minor’s property does not actually hold title to the minor’s property. The guardian may only act with respect to the property. The guardian has to account to the court for these actions, such as making investment decisions. This court oversight can make guardianships an expensive option.

Custodianship

A custodianship is different than a guardianship. Unlike a guardianship, the custodianship must generally be set up during the decedent’s lifetime in a will or other instrument.

The custodian holds actual title to the minor’s property. The custodian can expend income from assets and the assets themselves for the benefit of the child. The custodian can generally do this without court supervision. This makes a custodianship less expensive than a guardianship.

Property given to a trustee to hold for the benefit of the child under the Uniform Transfers to Minor Act (UTMA) allows the trustee to act as the custodian for child with respect to the trust property. The downside is that the custodian generally has to deliver the assets outright to the child upon the child reaching the age of majority.

Trusteeship

An individual can also be appointed as the trustee of a trust. The trust can be set up during the decedent’s lifetime or in a will. If the trust is set up during the decedent’s lifetime, it is referred to as a living trust. If the trust is created in the decedent’s will, it is referred to as a testamentary trust.

The trust, whether living or testamentary, is the most flexible option available for managing property for minor children. For example, the trust can postpone the actual transfer of property to the minor child until he reaches any specified age. Similarly, the trust can spell out when and now distributions are to be made to the child. The trust can even be structured to provide incentives or disincentives to encourage children to act or not take pre-defined actions.

Even if these individuals are appointed to manage property for minor children, there are several scenarios in which minor children will not be able to inherit the property. These scenarios can involve wrongdoing by the child or actions taken by the parents. The next article discusses these situations where the child is not able to inherit property.