Estate planning, with your minor children in mind, requires more than simply choosing someone to raise them. Another equally important consideration is who will manage the money and property that your children will inherit. Certainly, they cannot do it themselves. While you can leave instructions in your will or living trust, there are many issues that need to be addressed. For example, you need to know exactly how to leave real estate behind for your minor child.
Why early planning is a must
It is true that most parents leave everything to each other, expecting the surviving parent to care for the children. In those situations, the children are named as alternate beneficiaries. On the other hand, single parents often leave all of their property directly to their children. In either case, it is necessary to plan for the possibility that your children will receive their inheritances when they are still too young to manage it themselves. Someone competent and trustworthy needs to manage the property for them. More importantly, real property comes with its own set of issues that need to be considered.
Property management choices
If you do not want to rely on a court-appointed guardianship for your children, but you want to avoid the possibility that your child might not be mature enough to manage an inheritance wisely, there are a number of strategies. In order to protect your children and their inheritance it is important to choose someone in advance to manage the property your minor children will someday inherit. There are several ways to accomplish this, including naming a custodian under the Uniform Transfers to Minors Act.
The Uniform Transfers to Minors Act
The Uniform Transfers to Minors Act, adopted by most states (including Nevada), allows you to select a “custodian” to manage the property you leave to your child. If that child is under the age of majority at the time of your death, the custodian automatically steps in to manage the property. This can easily be accomplished by titling the property in the name of the minor, naming the adult as custodian under the Nevada UTMA. Typically, the custodianship ends automatically once the beneficiary reaches a set age, between 18 and 25. It is best to state the age in the deed, itself. If you want your child’s inheritance to be managed longer than that, have greater control and discretion, a trust would be a much better option.
What if I don’t provide for property management?
If you have not arranged for management of your child’s inheritance, then the probate court will do so, by appointing someone as the child’s “property guardian.” The court-appointed guardianship can be expensive and complicated, with frequent reporting requirements and limited management authority.
Legal issues inherent in real estate
Inheriting a house can result in its own set of unique issues. Couple that with the complications of minor inheritance, and the advice of an estate planning attorney becomes very valuable. Will the child live in the house, or should it be rented or sold? Another consideration is whether the home needs remodeling or upgrading. An inspection may be necessary to determine what needs to be done to the house, before it’s sold or rented. These, and other concerns can be discussed with your estate planning attorney.
If you have questions regarding inheritances to minor children, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd. by calling us at (775) 823-9455.