PROVIDING FOR MINOR BENEFICIARIES

     When planning for the transfer of our assets at our death, quite often we overlook the unexpected results of leaving assets to children or others who are minors. Under Florida law, a person is considered a minor if he or she is under age 18. The age of majority may be 21 in other states. When assets are left to a minor, without proper planning, an undesirable result may be inevitable. Consider the case of Joan and Fred.

     Joan and Fred live in Florida and owned everything jointly. They had 2 children, Annie and Toby, ages 5 and 8. They prepared simple Wills leaving everything to each other and upon their deaths, their assets were to be distributed to their children. Their Wills named Joan’s sister, Jill, as personal representative of their estates. Fred and Joan were killed in a car accident. All of their assets, including their home, bank accounts and personal belongings, totaling $350,000, were left to Annie and Toby. What happened?

     By law, the probate court must supervise the payment of debts and distribution of assets according to a decedent’s Will. Therefore, before Jill could transfer Fred and Joan’s assets to Annie and Toby, Jill needed to open a probate proceeding. Jill hired an attorney to open the probate and to be appointed by the probate court as the personal representative. To complicate it further, in Florida, beneficiaries under age 18 cannot not take title to or possession of their parents’ assets in their own name. A legal guardian must to be appointed by the court. Therefore, Jill had to also hire an attorney to apply to the court to have her appointed legal guardian over the assets of Annie and Toby. She was responsible for managing the assets for Annie and Toby until they reached age 18. She had to apply to the court each time she needed to expend funds on their behalf and was required to file an annual accounting report with the court showing how the assets were used. When Annie and Toby reached age 18 they demanded their share of the assets and quickly depleted their inheritance. This was not what Joan and Fred wanted.

     Could this result have been avoided? Absolutely. Had Joan and Fred established a living trust, they could have specified in the trust at what age (or ages), age 18 or older, they wanted Annie and Toby to receive their inheritance. Jill could have been named as the successor trustee to automatically take control of the trust assets upon Fred and Joan’s deaths. There would have been no probate proceeding and therefore no attorney costs, time delays and court supervision. In addition, there would have been no need to appoint Jill the guardian over the children’s assets because as trustee she would already have had immediate authority to manage and invest the trust assets and to use the assets for Annie and Toby’s health, support or educational needs. Furthermore, the temptation to Annie and Toby of spending their inheritance frivolously would have been eliminated. By being held in trust until Annie and Toby reached the age or ages specified by Joan and Fred, their assets would have been preserved and protected for their children.

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