If you have minor children, you’ll have to get creative to give them their inheritance because the courts don’t allow beneficiaries to inherit property if they’re under 18 years of age. To make sure your children receive their inheritance, you have three options:
- Restricted Accounts – A restricted account—such as a 529 account—can be used to leave money for your child’s education. If you use this type of account, your child can only use her inheritance to pay for her education. If she chooses to not go to college, another beneficiary will inherit the account.
- Staged Inheritances – Rather than pay a beneficiary in a lump sum, you can distribute the inheritance in stages. Most parents gift in stages as their children reach a certain age or milestone in their life. For example, your child could inherit 50 percent of her money when she turns 25 and the other 50 percent when she gets married or has her first child.
- Lifetime Trust – Your last option is to leave your child’s inheritance in a trust. Using a trust protects your child’s inheritance from creditors and divorce. You can also list an alternate beneficiary in the event that your child dies before depleting the trust. The trust can also help your estate avoid estate taxes and create a lifelong legacy for your family.
Discuss your options with your estate planning attorney about leaving money for your minor children. There are plenty of options for protecting the financial future of your children, and with the right estate plan you can ensure that you’ve provided for your children even when you’re no longer there to do so yourself.