Monthly Archives: February 2015

Flexibility of Bequests to Minors

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Author: Denise Martin

Maryland law provides great flexibility to individuals seeking to leave assets to minors or young adults after death. Generally, assets cannot be titled solely in a minor’s name, and further, many minors and young adults do not possess the fiscal responsibility to be entrusted with valuable assets. So what should a parent, aunt, uncle, grandparent or family friend seeking to pass assets to a minor upon their death do?

One option available is to include a simple bequest in a will or trust document to a minor under the Maryland Uniform Transfers to Minors Act (UTMA). Typically, a parent of the child serves as the custodian of the account until the child reaches age 21. However, that property typically becomes the minor child’s outright at age 21, which may be sooner than one would prefer.

Another, more flexible option available is the use of a trust established in one’s will (a “testamentary trust”) or other estate planning document, such as a revocable trust agreement. A trustee is appointed to oversee the trust on the child’s behalf and to make disbursements. The individual creating such a trust has the ability to determine at which age or ages the child should receive the asset outright. For instance, the trust creator may want to delay the minor’s receipt of the asset until age 25 or allow for graduated disbursements (e.g., 50% at age 25 and 50% at age 30). Others may wish to incentivize life achievements by limiting disbursements based on accomplishments, i.e., graduation from college. Limitations can also be placed on what disbursements may be used for, i.e., for educational purposes, for the purchase of a home, etc. The possible structure of such a trust is so flexible that the options are virtually limitless.

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