One of the main concerns with naming a minor as a beneficiary is ensuring that any money is used for appropriate purposes, like health or education. Creating a well-designed plan will ensure the money is used in a responsible way.
The first step to naming minors as beneficiaries is to find an adult or person over the age of 18 that you trust who can administer the assets. This person will make sure that the children receive the money in the appropriate manner when they reach a mature age. The person that oversees these matters must be someone you trust, but does not necessarily need to be the guardian of the children.
Minors and IRA
When naming a minor as the beneficiary of an IRA the minor must set up a beneficiary IRA. The minor must have a custodian (or trustee) that manages withdrawals on behalf of the minor. Technically the minor beneficiary of an IRA can name anyone as the custodian once you have passed, so it is important to personally name a custodian for your minor before anything should happen.
Uniform Transfers to Minors Account (UTMA)
A UTMA account may serve as another option, allowing you to leave money to a UTMA account which is then overseen by a chosen custodian. Special consideration should be given to how the UTMA account may affect eligibility for college aid programs and other government benefits.
Estrada Legal PC
At Estrada-Legal, PC, we approach estate planning with the idea that your family is your most important asset. Once you have carefully chosen the appropriate guardian for your children, we can create the legal framework. No matter how young or old you are it is important to create an estate plan that is tailored to your family’s needs.