Once someone turns 18 years old, they are free to inherit directly. So parents of adult children can just earmark assets for their children in their will or any other way they wish.
If, however, the parent dies before the child turns 18, they need another option. Minors (those under 18) cannot directly inherit because the law does not consider them responsible enough yet. Here are some alternatives:
A special account
There are special accounts designed to hold money for a minor who inherits until they reach the age of majority. These accounts can be created under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). Another option is a 529 account. There are, however, limits to how much you can place in any of these.
A conservatorship
A court can authorize a conservator to take charge of the assets the child will inherit until they turn 18. It’s best if the parents themselves choose who this might be and make it clear in their estate plans. Where only one parent dies, the other parent would usually fulfill this role, but if both die, then a third party will be required. If the parents do not choose one, close family members can apply for the role, but it will be down to the court to have the final say.
18 may still be too young to inherit
Think back to when you were 18. If both your parents had died, would you have been able to handle the inheritance they would have left you? Or would you have been likely to waste it due to your inexperience and lack of maturity?
Many parents decide it is best to use trusts to have someone manage the money on their children’s behalf until they are older, say 21 or 25. Whatever you opt for, it’s crucial you have some plan in place to provide for your children if death takes you away from them early.
