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August 15, 2015

Estate Planning For the Benefit of Minor Children

For those with children who have not yet reached 18, the importance of providing all of your child’s needs in the event that you pass before the child reaches the age of adulthood is paramount.  Unlike adult children, minor children have more needs and will be more dependent on the estate, therefore it is important that the estate be administered in such a way that guarantees the maintenance of the minor children.

Guardianship

When it comes to deciding who should watch over a minor child after both parents pass, the court is not qualified to make a decision that caters to the preferences of the parent(s) and needs of the specific child.  The parent can appoint a guardian in his/her last will and testament, and that person can raise the child, allowing the parents to make a decision about who should be the deciding adult in their child’s life.  Leaving this decision to the court could be a disaster if the parents had someone specific in mind, but failed to dictate such in a will.  Appointing a guardian in a will can also help to avoid any fights over guardianship of the minor children, as the parents’ intentions will be made clear in the will.

Assets

Gifting assets or money to young children in significant amounts is much more difficult to do than if you were gifting an adult.  If a parent wishes to leave money to his/her minor children in the event of his/her death, the court will appoint the guardian specified in the will to raise the children, but the court itself will control the inheritance until the child reaches the age of majority, at which time the child will receive the intended gifts all at once.  While ensuring the court manages the money/gift may be reassuring, the drawbacks are obvious.  The money goes to the child when he/she reaches 18, which almost assuredly is too young to properly manage significant amounts of money.  On another note, the expenses and inconvenience of accounting to the court formally during such guardianship will be costly and those costs will be paid for by the inheritance, which lessens its value.  Anyone who wishes for a different arrangement including more flexibility or control will need to utilize one or more of various tools to obtain their objectives.

Custodianship Provided by South Carolina’s Uniform Gifts to Minors Act

South Carolina’s Uniform Gifts to Minors Act regulates the gifting of significant assets to minor children. Under this Act, appointing a custodian provides more control for the parent while still maintaining strict requirements on the chosen custodian to ensure that the minor child’s best interests are taken care of in alignment with the parent’s preferences.  A custodianship allows the parents to nominate an adult to manage the child’s inheritance until the child reaches a specified age of no more than 25.

Trusts

Another option is to leave a trust for the benefit of the child.  A trust can provide a trustee to manage the child’s assets until the child reaches a certain age, dictated by the trust.  A trust is much more flexible than a custodianship or a guardianship and can extend the payment of the inheritance to the child beyond 18 years old and can be flexible enough to provide for changed circumstances in the child’s life.  There also is not a court supervision requirement, which then removes some of the complexity involved with guardianships.  Further, the parents also have the ability to make specific decisions about how the trust is used, a form of control not offered with guardianships or custodianships.  There are different categories of trusts that can accomplish various objectives, however, you should seek the help of an attorney in determining which trust is best for your child’s needs in the event you pass before they meet the age of majority.
While thinking about passing with a minor child may be difficult, Anderson Law Firm can make the burden much lighter by providing skilled help in determining how to plan your estate appropriately.