Inheriting money is usually a good thing that comes out of an unfortunate situation. Sometimes, though, things can be more complicated than they need to be when it comes to getting access to the money. One of those times can be when a minor child inherits money.
In Massachusetts, as in most states, a minor child (under the age of 18) cannot legally inherit money or receive the required notices involved in probating an estate. If a minor is the direct beneficiary of a will or life insurance or other account, a conservator must be appointed by the court to manage the money for them. Usually it is a parent who is appointed the conservator. This involves going to court, paying a filing fee, appearing before a judge, filing a bond (and sometimes paying a fee for a corporate surety on the bond, depending on the amount of inheritance) and then filing an accounting with the court every year (and paying the associated filing fee) to report what is being done with the money. When the child turns 18, they are legally entitled to all of the money, whether or not they are suited to handle it.
The above process is lengthy, involves court costs and legal fees that could be avoided, and provides no safe guards for the money.
However, if the person naming the child as a beneficiary of their estate makes some adjustments to their plans, things can go much more smoothly with less court involvement, lower costs and more control over the funds.
The main way an inheritance to a child can be protected is by naming someone, called a trustee, to hold and manage the money for that child until an age specified in the trust. This way, the trustee is the person who receives the court notices, they are the person who marshals the funds and they are the person who holds the money or makes distributions out for whatever purposes the trust indicates – often educational or health related. The child is still the beneficiary of the funds, but they are managed by a third party (who could be one of their parents or a professional) until the child reaches an age at which they are entitled to the funds. This age is set by the person leaving the inheritance, rather than simply by virtue of the child reaching the age of majority.
If you are planning on leaving an inheritance to a minor child, or you think a relative may be planning to leave an inheritance to your minor children, take some time to make sure that the legal documents are set up appropriately so that the full inheritance can be used for the child’s benefit, and not spent on unnecessary court costs and legal fees. If your child has been left funds directly already, seek legal advice regarding the appointment of a conservator and what steps need to be taken to safeguard the inheritance.