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Minor children

Minors lack the legal capacity to manage property. If you want to give property to a minor, either during your lifetime or through your will, you should select the best method to do so.

• Who is a "minor"?
• What is the easiest way to give property to a minor?
• How can I avoid the need for a guardian?
• Can I manage the minor's property without setting up a trust?
• Do I need a lawyer to make a substantial gift to a minor?

Who is a "minor"?

A "minor" is a person who has not reached the "age of majority" - i.e., someone who is not yet recognized by the law as an adult. The age of majority varies from state to state.

What is the easiest way to give property to a minor?

"I want to give property to my young grandchildren. What should I do?"

You could simply make the transfer directly to the minors. If the property is of relatively low value (for example, traditional birthday or holiday gifts, such as clothes or pocket money), this method works well.

However, if you give a minor a significant amount of property (sums in excess of $1,000 or $5,000 depending on the state) or the property requires management, a direct transfer to the minor will require a court to appoint a "guardian" to manage the minor's property. This requires a lawsuit and court involvement, and thus might be costly and time-consuming.

In addition, any guardianship will end when the minor reaches the "age of majority" (18 or 21, depending on the state), possibly before he or she is mature enough to handle the property prudently.

How can I avoid the need for a guardian?

If you are leaving a minor a substantial amount of property, the best device to use is a trust, either a trust you establish during your lifetime or one that you write into your will. In either case, you can name the person who will manage the property on behalf of the minor. This person is called the "trustee". You can also spell out exactly how you want your property used for the minor and when and how it should be distributed. An experienced estate planning lawyer can help you achieve your goals and minimize your costs and risks.

Can I manage the minor's property without setting up a trust?

"I don't want to go through the trouble of establishing a trust, but I want to give my grandchildren property that can be used for their education? What can I do?"

As an alternative to a trust, you could transfer your property to a "custodian" for your grandchildren under the Uniform Transfer To Minors Act, which has been adopted in almost every state. Under the Act, you can make a gift to your grandchild and retain management by naming yourself or another person to serve as custodian.

The custodian will manage the property for the benefit of the minor and then distribute any remaining property to the minor when he or she reaches the age of majority (or age 25, in some states). Although not achieving all the benefits of a trust, transfers under the Act are cost-effective, simple to make, and less complex - because most of the terms of the arrangement (including the custodian's powers, duties, and responsibilities) are set out in the Act. Custodianships are often used when the value of the transferred property is too low to justify the costs of a trust.

However, because the property transferred under the Act must be distributed to the beneficiary at the age of majority (or age 25 in some states), it is not wise to use this device if a significant amount of property is to be transferred.

An experienced estate planning lawyer can advise you as to which device is best suited for your situation.

Do I need a lawyer to help me make a substantial gift to a minor?

You are not legally required to use a lawyer, but a lawyer experienced in estate planning can help you make your gift in a way that accomplishes what you want and minimizes your taxes.