Estate Planning for Minor Children
The best way to plan for minor children is to have your estate planning documents in place. Both a will and a trust have mechanisms to protect and take care of your minor children upon your death, but only a trust allows for incapacity planning as well.
Inheritance Issues with Minors
Minors are considered incapacitated and cannot directly inherit property. This means that if a minor is named as a beneficiary or inherits property from someone who did not have their estate planning documents in place, special arrangements must be made to manage the inheritance until the child turns 18.
Options for Managing a Minor’s Inheritance:
-
- Guardianship of the Estate: A court-appointed guardian is responsible for managing the minor’s property. This can be a complex and time-consuming process.
- 1301 Management Trust: This is a less restrictive alternative to guardianship. A trustee is appointed to manage the assets for the minor’s benefit, but the court’s involvement is limited.
- Court Registry: Inheritance is deposited into an account with the court and held for the child until they turn 18, at which point they get the entirety of the inheritance outright.
- Custodianship Under the Texas Uniform Transfers to Minors Act (UTMA): This allows for a designated custodian to manage the assets for the minor’s benefit until they reach the age of majority.
Possible Legal Document for Estate Planning with Minor Children
- Declaration of Guardian for Minor Children: This is the document that lays out who you would want to have full-time, permanent custody and decision making authority for your children in the event of your death or incapacity. If you have this documents in place, the court must consider your preferences when appointing a guardian of your children. You can also exclude specific people that you would not ever want appointed as guardian of your children. The court is barred from appointing anyone whom you disqualify.
- Temporary Guardian for Minor Children: This document allows you to name several people who for your children to stay with temporarily in the event that your designated guardian is not immediately available to take custody of your children so that your children are never taken into custody of Child Protective Services. For example, you might appoint your neighbor as a Temporary Guardian, because they live next door and your designated guardian may live several hours away or travel frequently.
- Health Care Proxy for Minor Children: This document appoints someone to make medical decisions for your children in the event that you are unavailable. For example if your children are staying with grandparents while you travel and those grandparents are named, they can take your children to the doctor and authorize treatment without having to wait for you to return.
- Instructions to Caregivers: We informally call this the “backpack” or “babysitter” document. It is essentially an “in case of emergency, contact these people” document that you can leave on file with your child’s daycare, school, or caretaker.