If you are a parent or guardian of children under 18, the well-being of your kids is often at the forefront of your mind. And part of that means planning for unforeseen circumstances. If you’ve ever thought about how you can make sure your children are provided for in the unfortunate event of your untimely passing, this article is for you.
Inheritance laws for minors in Maryland can feel like a lot to process. However, with a clear understanding of inheritance laws for minors and a well-structured estate plan, you can protect your children’s financial future.
In this article, we explore inheritance laws for minors in Maryland. We will break down each aspect of minor inheritance laws and discuss how to best take care of your children for long after you’re gone.
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Do Minor Children Have Any Rights to Inheritance?
Short answer: Yes! But, according to inheritance laws for minors in Maryland, the way minors and adults inherit is not the same.
In Maryland, minors cannot directly inherit property until they reach the age of 18. Any assets left to them will need to be held in either a trust or be under the supervision of a court-appointed guardian of property or custodian until they come of age.
Dying Intestate vs. With a Will
A legally binding Last Will and Testament means that the assets in your estate will be distributed according to your wishes. This means that your wishes related to property guardianship and trusteeship will already be established.
On the other hand, if you pass away without a valid Will in place (also called “dying intestate”), then your assets will be distributed according to Maryland intestacy laws. An executor (also called a personal representative) will be appointed by the probate court, to oversee the inheritance process.
With a valid, up-to-date Last Will and Testament that includes a testamentary trust, you have the ability to designate a guardian or trustee.
Can Minors Inherit Money?
A minor can inherit everything that an adult can. This includes:
- Monetary assets, real estate, personal belongings, stocks, bonds, etc.
- Intangible assets: Intellectual property, royalties, or digital assets.
However, there is a caveat: Most financial assets, including real estate and bank accounts, will be under the control of a trustee or guardian of property, who has a responsibility to act in the minor’s best interest.
Options For Providing For A Minor Beneficiary In Your Estate Plan
General Guardian or Guardian of Property
According to inheritance laws for minors in Maryland, when no trustee or custodian is designated in a Last Will and Testament, the courts will require a ‘guardian of property’ be appointed to manage the funds for the minor. A guardian of property, also called a ‘guardian of the estate’, is someone appointed by the court to manage a minor’s estate. This guardian will hold assets and be responsible for ensuring that the minor’s inheritance is used in a way that is beneficial to their future.
A guardian of property’s management over the minor beneficiary ends at age 18. They must also submit formal annual accounting requirements to the courts.
A guardian of the property is appointed only if there’s no trust set up or custodian designated.
Set Up A Testamentary Trust For Your Minor Child
A testamentary trust can provide minors with limited access to their inheritance while also protecting them from making financial mistakes or being taken advantage of financially until they reach a certain age.
When you create a trust, you designate someone to act as a trustee. A trustee can be a family member, such as a surviving spouse, or a friend. But you can also designate a trusted advisor (such as a lawyer or accountant).
The trustee will be responsible for administering assets and making sure that they are used responsibly, while still allowing access when necessary. For example, you can set up a trust so that funds are available for educational, medical treatments, or other life expenses.
Benefits of a Testamentary Trust
Unlike other methods of bequeathing assets to minor beneficiaries, establishing a trust allows for more strategic and long-term financial planning that can extend beyond the beneficiary’s 18th birthday. Instead of allowing beneficiaries to receive their full inheritance immediately upon reaching adulthood, a trust can be structured to distribute assets gradually. The idea is to provide consistent financial support for your children and help them to develop good money-management skills.
Other benefits of testamentary trusts include:
- Protection from creditors: Assets held within a testamentary trust may be protected from the minor beneficiary’s potential creditors.
- Ability to choose a trustee: If a minor inherits assets directly, a court-appointed guardian will be required to manage those assets until the minor turns 18. A testamentary trust allows you to select someone you trust to manage the assets for your minor child.
Establishing a trust for your children plans for their future and providing them with long-term benefits.
Custodian Under the Uniform Transfer of Minors Act
The Uniform Transfer to Minors Act (UTMA) is a law that allows for the transfer of assets to minors–without the need to establish a trust.
A UTMA account is simple and inexpensive to set up. Another benefit is that, under the UTMA, minor beneficiaries have access to their assets before they turn 18–via a custodial account.
If your child has specific financial needs, such as medical or educational expenses, setting up a UTMA account is especially beneficial.
The Negatives of the UTMA:
- No tax benefits for contributions like there are in a trust.
- When the minor reaches the age of majority, there is no oversight–they gain complete control over their inheritance.
- Assets under the UTMA are in the child’s name, so it will lower financial aid significantly.
- The custodian has complete control over the assets until the minor child turns 18, and, unlike in a trust, there are no provisions for oversight or accountability.
Why Trusts Are Your Best Option
When it comes to providing for a minor, setting up a trust is the most secure and reliable option. Trusts allow you to set standards that govern how and when your children will receive their assets. You can decide, in advance, who will manage specific assets and what those assets can be used for.
Another major benefit to setting up a trust: you get to choose someone you trust to handle your children’s assets. The ability to select a trustee provides better protection for their inheritance–while still allowing them to access funds when needed.
Inheritance Laws for Minors in Maryland: The Importance of Planning Ahead For Your Child’s Future
Protecting your children’s inheritance is vital for their future. Crafting a clear, thorough estate plan allows you to ensure that their inheritance remains in good hands.
Typically, the most effective way to have your minor’s assets well-managed is to craft a comprehensive estate plan that includes a trust. Trusts can keep your children’s assets safe from bad financial choices, creditors, and other money mishaps. Trusts can make sure your kids are taken care of and prevent potential family disputes over assets.
With a comprehensive estate plan in place, your final wishes regarding financial affairs and distribution are respected. Planning ahead offers your children the financial stability they require as they mature, granting them peace of mind and a stable future.
Providing for your minor children is an important part of estate planning. While there are several approaches available, setting up a trust is often the best option. A trust can provide financial protection while also ensuring that the minor’s needs are taken care of until they come of age.
It’s vital to work with an attorney to create a clear, comprehensive estate plan. Working with an experienced estate planning attorney means your kids get financial stability as they grow up.
Talk to PathFinder Law Group–An Experienced Estate Planning Attorney
PathFinder Law Group is here to help with all your estate planning needs. We can create a comprehensive estate plan that meets your specific goals.
We get how important it is to secure your children’s financial future, and we can help you keep their future safe. Schedule a consultation today and let us help you create a tailored estate plan that protects your minor children and their inheritance. If you need help creating a comprehensive estate plan or have more questions related to inheritance laws for minors in Maryland, schedule a consultation or call us at (443) 579-4529.