When a client wishes to leave an inheritance to a minor (a person under age 18), the most important advice is to never leave the bequest outright. The same notion is true for someone who is disabled as we recently posted about on our Blog at https://jacksonlawgroup.com/asset-protection/the-use-of-supplementalspecial-needs-trusts-in-estate-planning/. The problem with leaving an inheritance outright to a minor is that the court will require the establishment of a guardianship for the minor’s benefit, which can be very costly and overly burdensome.
One way to avoid the expense and frustration of a Florida guardianship is to include a provision in your Will or Trust that your personal representative or trustee is permitted to transfer any asset payable to a minor to someone specifically or to someone else selected by the personal representative or trustee as custodian under the Florida Uniform Transfers to Minors Act (UTMA) for the benefit of such minor. The UTMA was enacted and adopted in Florida to allow a donor the ability to appoint, or assign the appointment of, a custodian who will manage and invest the funds or property until the minor reaches a certain age. For transfers authorized by a Florida Will or Trust, an UTMA account is required to be turned over to the minor at age 21. Although you can name who will be the custodian (and successor custodian), you generally cannot control where the funds or property goes upon the minor’s death.
Since age 21 is not generally regarded as a sensible age to hand over large sums of money and for other reasons as mentioned above, a better way to provide for minors is not through an UTMA account but through a sub-trust created under a Will or a Florida Living Trust. Such a Trust can provide funds to help raise the beneficiary, provide for college, buy a home, etc., at the discretion of the personal representative or trustee. The Trust can provide that the funds be turned over to the beneficiary when the beneficiary attains a specified age, such as 25 years of age. The Trust may even provide for different payment plans, such as 50% at 25 and the balance at 30 years of age, or even monthly installments. Additionally, the Trust can provide who receives the funds or property if the minor dies. For example, a Trust can provide for this contingency by stating that upon the child’s or grandchild’s death, such share will pass to the other children or grandchildren.
It is strongly encouraged to contact a qualified Florida attorney when deciding to leave an inheritance to a minor to uncover which method best fits your needs. Also, make sure to ask an attorney about the tax implications that are associated with these methods.