What happens if you leave money to your twelve-year-old granddaughter in your will, and something happens to you before she turns eighteen? Many clients are surprised to learn that a minor cannot simply walk into a bank and claim an inheritance. In New York, if a child is set to receive more than $10,000 through a will, intestacy, or a settlement, the Surrogate's Court generally must appoint someone to manage that money until the child comes of age. That guardianship process is public, can take months, and often requires a bond, annual accountings, and legal fees paid from the very funds meant for your grandchild. With the right planning, you can leave assets to a minor while avoiding court involvement entirely.
Court supervision is generally triggered once a minor's inheritance exceeds $10,000. Below that figure, a parent can often collect the funds on the child's behalf without a formal proceeding, since banks and insurance companies will typically release smaller sums directly. Above that threshold, however, the court steps in unless your estate plan already names someone to manage the money. This rule applies whether the assets pass through a will, through intestacy because there was no will at all, or through a wrongful death or personal injury settlement. I have seen families assume that naming a minor as a beneficiary on a life insurance policy or retirement account is harmless, only to learn later that the insurer will not release a six-figure death benefit to a fourteen-year-old, and instead insists on a court-appointed guardian before releasing a dime. That is why I advise clients not to leave assets outright to a minor on any document, whether a will, a beneficiary form, or a jointly titled account, but instead to build a mechanism into their estate plan that keeps the matter out of Surrogate's Court from the start.
If no such mechanism exists, a guardian of the property must be appointed under Article 17 of the Surrogate's Court Procedure Act. This is a formal proceeding that requires a petition, service on the child's parents and, in some cases, grandparents, and the posting of a bond in many instances. Once appointed, the guardian must file annual accountings with the court, keep meticulous records, and often seek court permission before making significant decisions about the funds. Every one of these steps carries a cost, whether it is filing fees, bonding premiums, or attorney's fees, and every one of those costs comes directly out of the child's inheritance. I have spoken to clients whose families spent thousands of dollars and many months in court simply because a grandparent's will left money outright to a grandchild without any further instructions.
One straightforward option is to direct, in your will, that any inheritance passing to a minor be held by a custodian under the Uniform Transfers to Minors Act, commonly called UTMA. The custodian you name, who might be a parent, a sibling, or another trusted relative, manages the funds for the child's health, education, maintenance, and general welfare, with no court oversight and no annual accounting to a judge. In New York, the child receives whatever remains in the account at twenty-one, unless you specify eighteen instead. Setting this up is inexpensive and requires nothing more than a sentence or two in your will naming the custodian and the age of distribution. I recommend this option to clients who want a simple, low-cost solution for a bequest that is likely to be spent down for the child's benefit well before the child reaches adulthood, such as a modest life insurance payout or a smaller inheritance from a grandparent.
For larger inheritances, or for parents who want more control over the timing and conditions of distributions, I often recommend a trust created within the will itself, known as a testamentary trust, or a stand-alone revocable trust set up during your lifetime and simply funded through your will or beneficiary designations at your passing. As we discussed in a prior article on funding a revocable trust, assets held in trust bypass Surrogate's Court entirely because a trustee, not a court-appointed guardian, is already legally authorized to manage them from the moment the trust is funded. A trust also lets you stagger distributions well past age twenty-one, releasing a portion at twenty-five and the remainder at thirty, for example, rather than handing a young adult a lump sum the moment they turn eighteen or twenty-one. This flexibility matters most for larger estates, blended families, or situations where a parent has concerns about a child's maturity or financial judgment at a young age. Unlike a UTMA custodianship, a trust can also include specific instructions about how funds should be used, whether for education, a first home, or a business venture, and can name a successor trustee if your first choice becomes unable or unwilling to serve.
Whether a UTMA custodianship or a trust makes more sense for your family depends on several factors: the size of the inheritance, the number of children involved, whether you want distributions to happen all at once or gradually over time, and how much oversight you want to build in after you are gone. A UTMA account is often the right fit for smaller, straightforward bequests, while a trust is generally better suited to larger estates or families who want lasting control over how and when a child receives their inheritance. I walk every client through both options, along with the practical costs and benefits of each, before recommending a path forward tailored to their specific family circumstances.
If your loved one left behind assets for a minor child which need to be protected from court supervision, contact us today at (347) 766-2685 for a free phone consultation.
Contributed by Roman Aminov, Esq, a Queens estate attorney in New York City.
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