When you create a retirement account, take out a life insurance policy or open a savings account, you need to name a beneficiary who will receive those funds when you die. Parents naturally want to provide for their children – so should they name their minor children as their beneficiaries? In most situations, the answer is no.
Some states do not allow underage children to receive a direct inheritance. The funds will need to be held in an account for their benefit. If you have not named a guardian and/or trustee for your children, the courts will decide who will manage the funds on behalf of your child. If a minor beneficiary comes of age, the child may inherit assets the grandparent wanted to be withheld until they are older.
If you do choose to designate your minor as the beneficiary, you can name another trusted adult as the custodian. If you die without naming a custodian, the court will decide who will manage the funds.
Custodians can be authorized under a law called the Uniform Transfers to Minors Act (UTMA), which has been adopted by every state except South Carolina. The UTMA allows someone to transfer money, real estate or art to a minor child without establishing a guardian or trustee. The UTMA gives the custodian the legal responsibility to manage and use the money for the benefit of the minor child named as the beneficiary.
Under the Illinois Uniform Transfers to Minors Act allows the following items to be transferred to a minor:
• certificated or uncertificated securities
• money paid or delivered to a broker or financial institution for credit to an account held for the minor
• a life or endowment insurance policy or annuity contract
• property subject to a power of appointment
• real estate
• tangible personal property created by a certificate of title
• a land trust
• property not otherwise specified
The experienced estate planning attorneys at Estate and Probate Legal Group have experience in creating or updating estate plans to fit each client’s personal circumstances. Please contact our office at 630-864-5835 to schedule a meeting with our experienced attorneys to spring clean your estate plan!
AREAS WE SERVE: Cook, Dupage, Kane, Lake, and Will counties