WillMaker offers three approaches to property management for property that passes to minors under your will:
The Uniform Transfers to Minors Act (UTMA) allows you to name a custodian to manage property you leave to a minor. The management ends when the minor reaches age 18 to 25, depending on state law.
States are free to adopt or reject the UTMA, which is a model law proposed by a group of legal scholars. Every state except South Carolina has adopted the UTMA, many making minor changes to it.
Unless you live in South Carolina, you may use the UTMA to specify a custodian to manage property you leave to a minor in your will until the age at which the laws of your state require that it be turned over to the minor. Depending on your state, this varies from 18 to 25. WillMaker keeps track of the state you indicate as your residence and tells you the age at which property management under it must end.
Among the powers the UTMA gives the custodian are the rights to collect, hold, manage, invest and reinvest the property and to spend it "for the use and benefit of the minor." All of these actions can be taken without getting approval from a court. The custodian must also keep records so that tax returns can be filed on behalf of the minor and must otherwise act prudently in controlling the property.
The child's trust, which can be used in all states, is a legal structure you establish in your will. If you create a trust, any property a minor beneficiary gets will be managed by a person or an institution you choose to serve as trustee until the beneficiary turns an age you choose— through age 35. The trustee's powers are listed in your will. The trustee may use trust assets for the education, medical needs and living expenses of the beneficiary. All property you leave to a beneficiary for whom a trust is established will be managed under the terms of the trust.
Because management under WillMaker's child's trust can be extended through age 35, it is also suitable to use for property left to young adults.
WillMaker's pot trust is a legal structure you can establish in your will. However, instead of creating a separate child's trust for the property you leave to each child, you create one trust for all the property you leave to your children. You name a single trustee to manage the property for the benefit of the children as a group, without regard to how much is spent on an individual child.
For example, if there are three children and one of them needs an expensive medical procedure, all of the property could be spent on that child, even though the other children would receive nothing. While this potential result may seem unfair, it, in fact, mirrors the reality faced by many families: Some children need more money than others.
The pot trust will last until the youngest child turns an age you specify, up to age 25. A word of caution: if there is a significant age gap between your children, the oldest children may have to wait many years past the time they become adults before they receive their shares of the property. For instance, if one of your children is five and another child is 17—and you specify that the pot trust should end when the youngest turns 18— the 17-year-old will have to wait at least until age 30 to receive a share of the property left in the trust.
All or none must go in the pot. The pot trust option is available only for property you leave to all of your children as a group. If you want to use the pot trust for some but not all of your children, you will need to see a lawyer.
Also, if you leave everything– or nearly everything--to your children in a pot trust, do not set up a child's trust or UTMA for your children. In that case, the terms of the pot trust apply to all of the property your children will receive under your will. No other property management is needed for that property. This also applies if you've left everything to your children in a pot trust as an alternate plan to leaving everything to your spouse. If you've set up a pot trust, you do not need an UTMA or a child's trust for your children. That said, you may still want to set up an UTMA or child's trust for any young beneficiaries of your will who are not your children. And you should still name a property guardian for you children. A property guardian will manage any property that your child owns or receives outside of your will – like income, life insurance, or inheritance from others.
If the beneficiary you name in your will is a minor, you don't set up property management, and the property you leave him or her is worth more than $2,000 or so, a court will likely appoint and supervise a guardian to manage the property.There are often drawbacks to property guardianships set up in court. They must end at age 18 and are commonly cumbersome, expensive and impersonal. Court approval is often required for routine management decisions, and costs are deducted from the property being managed. And they leave open the possibility that the judge may appoint someone unfamiliar with and unsympathetic to the minor's needs.
Read more about Choosing Among Management Options.