This article discusses child inheritance in Missouri and provides details about this subject, including the situations that can occur and the nuanced solutions to each.
In Missouri, as in all states, a child cannot inherit property in their own name until they reach the age of eighteen. An adult will need to manage that property until the child can manage it for themselves.
There are several ways a child can inherit property. If someone dies with a will or trust that names that child as a beneficiary, then it will be the responsibility of the trustee to manage that child’s property according to the terms outlined in the document.
If someone dies and makes a gift to a child under their state’s Uniform Transfer to Minors Act, the gifted money will be held in a custodial account for that child’s benefit to a certain age. Lastly, if someone dies and leaves money directly to a child or names that child as a beneficiary on a life insurance policy or retirement account, then the court will have to appoint a property guardian to manage the child’s money until they reach the age of eighteen.
If a child is named as a beneficiary of a trust, the Trustee will be required to obtain a tax identification number (also called a “TIN”) for that child’s trust to open up a bank or brokerage account in the name of the trust (using the new tax id number), and then distribute the assets to the child as directed by the revocable trust document.
For example, if a child is named the beneficiary of a trust to age 25 and the trust specifies that the Trustee is to distribute the money for that child’s education, health, maintenance, and support, then it will be the responsibility of the trustee to distribute money to that child until the child reaches the age of 25.
After that, the trust would terminate and the child would be responsible for managing and distributing the money themselves. The Trustee holds the responsibility to file a fiduciary tax return for this trust every year, to maintain records of how the money has been invested and spent, and to communicate with the child to ensure the money is being adequately distributed and well spent. Most trusts contain an “accounting provision” requiring the trustee of the Missouri trust to either proactively account for trust assets to the guardian of the child or to do so upon request by the guardian.
In some situations, people leave gifts to children without creating a trust to hold that money. The easiest way to do this is to leave money to a child under the Uniform Transfers to Minors Act (“UTMA”). This law varies by state to allow an adult, referred to as the “custodian” to manage assets for children until they reach a certain age.
For example, A will might leave a gift of money to a child like this: “To my niece, Ava, I leave a gift of $10,000 to Jack Williams, as custodian for Ava Williams, under the Missouri Uniform Transfers to Minors Act until age 18.”
Each state has a time limit for UTMA accounts that are established by will or trust when someone passes away. In Missouri, the UTMA account established must end before the minor reaches the age of 21. The will or trust specifies what age within this range applies. For example, a will might state, “I leave a gift of $15,000 to Bob Hall, custodian for his daughter, Jennifer Hall, under the Missouri Uniform transfers to Minors Act, until age 18.
The custodian of an UTMA account has the right to hold, manage, collect, invest and reinvest a minor’s property. They are required to act honestly and prudently and there is no court required approval. The money in an UTMA account can be used for the minor’s benefit, including education, travel, or anything the minor may need.
When the custodianship ends, the money belongs to the beneficiary to be used however they choose. All assets transferred to minors are irrevocable once made. For example, if a child decides not to go to college, the money is still theirs when the account terminates. The inability to make the gift contingent upon the happening of some event (for example, college graduation) other than age can be a major disadvantage to the use of UTMA gifts in certain circumstances
UTMA accounts can be created by the executor (if there is a will) or trustee (if there is a trust), if needed to transfer property to a minor, but the will or trust didn’t name a custodian.
In most states, this can be accomplished unless the account value exceeds a specific dollar limit, which then requires the court to approve the transfer.
Planning for child inheritance should be done in most cases with the assistance of an estate planning attorney Maryland Heights, Missouri.
Legacy Law Center is an Estate Planning, Probate, and Elder Law Firm in St. Charles County Missouri. Our firm can assist you with setting up a consultation to discuss your situation at our office. Call us today at 636-486-2669.