How to Leave Money, Assets or an Inheritance to a Minor Child in North Carolina

Until a child reaches the age of eighteen (18), they cannot inherit property outright, or in their own name. It needs to be held for that child in one of several different ways. First, money or property can be left to a minor in a trust. Second, it can be left to a child under a court-supervised guardianship and third, it can be left to a child under the North Carolina uniform Transfer to Minors Act.

Trust – A trust can be established during life or through a Will at someone’s death. If money is left to a minor child in trust, the trustee is the person who is appointed to administer and distribute the money to the child at various ages set out in the trust. The trust can continue long after the child reaches 18. The trust can also set out the circumstances that allow distributions to the child or on behalf of the child. The trust can be set up to support the child, to pay for college or for any other reason. Distributions can be set by age or can be contingent on behavior or other factors. Holdback provisions can be added to make sure the trust does not terminate if the child has substance abuse issues, criminal or mental health issues. The trustee must keep accountings of the trust assets and file tax returns for the trust.

Guardianship – If a child inherits money or property and a trust was not set up nor were arrangements made under the North Carolina Uniform Transfer to Minors Act, a court-supervised guardianship must be established. A person applies to the Court to become guardian of the child’s inheritance (or proceeds from a lawsuit or life insurance) and must invest and manage the money until the child turns 18. Every year the guardian must submit a detailed accounting to the court for audit. If the guardian wants to spend some of the money on the child, court permission is generally required. The same is true if the guardians wants to sell assets of the guardianship estate. The child automatically receives all of the guardianship assets at age 18; this is nonnegotiable even if the child is a spendthrift, irresponsible or has criminal or mental health issues.

North Carolina Uniform Transfer to Minors Act (NCUTMA) – Anyone can leave money to a child (during life or at death) under the North Carolina Uniform Transfer to Minors Act. Other states have similar acts. Generally, the money is placed in a custodial account and the custodian is the appointed person who manages the money. The money is typically held with a bank or other financial institution. In North Carolina, money can be held in an UTMA account until an age between 18 and 21 as set out in the initial account agreement or as set out in a person’s Last Will and Testament. Under no circumstances can this account continue beyond age 21. Money held in an UTMA account can be used for that child’s benefit and then at the age of termination the remaining money is distributed to their child outright.

If you are considering leaving money to a minor child, the attorneys in the Greensboro, Charlotte, Coastal or Triangle offices of Law Firm Carolinas can help you determine the best way for your situation.

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