Be Careful When Leaving Assets to Underage Beneficiaries
As a Framingham will and trust lawyer, I’ve worked with many grandparents interested in leaving a legacy behind for their grandchildren. A lot of people are surprised when I tell them they could be causing more harm than good if they aren’t careful.
Imagine this for a moment; what would you have done if you were given a large sum of money the day you turned 18 years old? Chances are that you would have blown it, right? You probably would have gotten into a bit of trouble. Most 18-year-olds don’t have the wisdom to understand the proper way to manage money so that it lasts and is available for important things when they need it. However, a qualified Framingham will and trust lawyer can help you determine what the best options are for leaving assets to underage beneficiaries, whether those assets are held in a Trust, financial accounts, or as part of a life insurance benefit.
Underage Beneficiaries in a Will or Trust
A good Framingham will and trust lawyer will always ask their clients if any of their beneficiaries are underage, or even if they would like to keep younger beneficiaries from accessing their full inheritance until they’ve reached a certain age, which is usually 25. If the children are underage, an adult property guardian must be named since minors are not allowed to inherit property. If a significant amount of property is left to the minor, a Trust should be set up to manage the property until the child comes of age. In fact, Trusts can be used to ensure the minor only receives their full inheritance once they reach a certain age or milestone, such as graduating from college, while at the same time providing assets to make sure the child can achieve that milestone.
Underage Beneficiaries of Financial Accounts
Many people choose to make beneficiary designations directly on their financial accounts, such as savings accounts, annuities, and retirement plans. Experienced Framingham will and trust attorneys will urge their clients to carefully examine the details surrounding these beneficiary designations, as minor beneficiaries cannot directly inherit assets after your passing. It is important to carefully consider the best way for your underage beneficiaries to receive the inheritance you leave for them at the time when they can make informed financial decisions on their own. Directing the assets to a Trust is often the best bet in these situations, but consulting with an attorney will give you a much better idea of how this should be done.
Underage Beneficiaries on Life Insurance
Many parents and grandparents name their children or grandchildren as beneficiaries on their life insurance policies. As with the cases above, though, an adult guardian or a Trust must be named in order to hold the life insurance proceeds until the minor comes of age. It is generally not advised to name minors as beneficiaries to life insurance policies, as courts will often appoint an adult to look after the proceeds– and that adult may not be someone you would have wanted to be appointed to such a role.
Speaking with a qualified will and trust lawyer can help you determine the best way to handle passing down an inheritance to underage beneficiaries so that the funds are not lost, mismanaged, or squandered. If you have any questions about the best ways to leave an inheritance to underage beneficiaries, please contact us at (508) 532-8689 to set up a consultation.