Minor Children as Beneficiaries of an Estate: Probate vs. Trust
When dealing with the loss of a loved one, the last thing most people want to deal with are complicated court affairs involved in settling the estate. When children are involved in the necessary distributions of an estate, a task which was already difficult can become infinitely more complicated. This article will outline the common practices and pitfalls involved in settling an estate in which a minor child has been named as a beneficiary.
Minor Children as Probate Beneficiaries
A minor child can be named as a beneficiary of an estate either by receiving a distribution in the will of the deceased, or through a determination by the State of Nevada’s probate court. The probate court is essentially the legal entity by which the State determines the proper distribution of a person’s property following their death. The probate court will have different levels of involvement in settling an estate in Nevada depending on the documentation left behind by the deceased. In all cases, however, the probate court oversees the proper distribution of assets from an estate.
Due to their age, the court will not allocate inheritances directly to a minor child, for what should be obvious reasons. What might surprise you to learn is that the court will not direct the money to the child’s parent or caretaker for safekeeping either. In a perfect would this would seem to be a logical workaround for keeping inheritance money secure until a child is mature enough to take charge, unfortunately, too often a parent or guardian will squander their child’s inheritance instead. In order to avoid such outcomes, the State of Nevada has provided a plan for setting up a guardianship for the purpose of managing the minor child’s financial interest in an estate. This is commonly referred to as a Guardianship of Estate. Such guardianships do not have control over the child themselves, they only manage the child’s assets received from inheritances or lawsuit settlements according to the rules set forth in Nevada law for their use and safekeeping. A Guardianship of Estate can be messy and complex, fortunately, when properly prepared, a trust can be established in such a way as to avoid the need for guardianship altogether and can set down rules for the safekeeping and distribution of funds for a minor child beneficiary.
Providing for a Minor Heir by establishing a Trust
When creating an estate plan people most often concentrate on establishing a will which lays out their final wishes and their desired distribution of assets, however, relatively few consider establishing a trust as part of their plan. A trust can be an especially useful estate planning tool when minor children are among the beneficiaries. As discussed above, simply leaving assets to a child in a written will leaves those assets subject to a Guardianship of Estate and requires that any distribution of those funds or assets before the beneficiary reaches the age of eighteen be approved by the court. A trust, on the other hand, can hold money, real property, and other assets and have these assets managed by a trustee of your choosing.
A trust comes with rules established by its creator dictating how the funds are to be managed. In the case of a minor child, for example, a trust can be established with the stipulation that funds are to be used to provide for the health, education, maintenance, and support of the child. It is the responsibility of the trustee to distribute the funds according to the rules of the trust; the trustee, in turn, is accountable to the courts for managing the trust correctly. This is different from a Guardianship of Estate in that the trustee is able to as act without prior approval of the court to distribute funds as needed for the support of the child. The court only becomes involved the administration of the trust if the trustee is suspected to be failing in their duties.
The trust can also set forth the age at which the assets of the trust are to be transferred to the now-grown child to manage entirely on their own. This can be at the age of 18, upon graduation from high school or college, or perhaps at a later age; up until this point as previously designated in the trust, the funds can still be managed by the trustee even if the child is no longer a minor. A trust can be as simple or as complex as the person establishing it wishes. The flexibility and option to customize a trust to individual needs is just part of what makes a trust such an excellent tool for estate planning. A trust, however, is only as good as the estate attorney that drafts it. In order to establish a trust that will truly suit your needs and provide properly for your loved ones it is important to seek out an experienced estate attorney to prepare it for you.
Whether you’re already dealing with an estate in probate or would like to being planning your estate to better provide for your loved ones, Fortress Law & Realty has the expertise you need.
Visit our contact page to schedule a phone consultation free of charge.