Nicolosi & Associates provides knowledgeable, personal attention to clients who are faced with the task of administering estates of minors. Our attorneys work with individuals and families to help them understand their goals, examining their current financial situation and needs, and ultimately providing individually tailored documents and the necessary representation needed to achieve those goals.
A child under the age of eighteen is considered to be legally “disabled” in the eyes of the law. In some states, a child is considered to be legally disabled until age twenty-one. This means that the law does not consider them to be capable of making decisions for themselves. Generally, a minor cannot take legal action without the consent of a custodian or legal guardian.
Minors are generally not considered to be responsible enough to properly handle and preserve funds or assets on their own. However, this does not prevent a minor from accepting such property. There are various situations in which a minor may be entitled to funds or assets. It may take the form of a gift from a family member, such as an inheritance or an interest in real estate, or perhaps it may come from the settlement of a lawsuit or insurance claim.
In order to allow minor to accept such gifts, structures are available by law which recognize the minor’s ownership of the property, while allowing a trusted adult to maintain possession. Although it may be appropriate to create a trust in situations involving large amounts of funds, more often than not, the property at stake in these situations is not valuable enough to justify the creation of a trust because of all of the restrictions and oversight that naturally accompany such a structure.
Under the Uniform Transfer to Minors Act (“UTMA”), the custodian of a minor can accept and hold funds or assets for a minor without going through the trouble of setting up a formal trust or other similar mechanism. This is accomplished by simply executing a document that states that the transfer falls under the UTMA and names the custodian that will hold the assets. It must also name the minor for whose benefit the transfer is being made. Depending on the type of assets transferred or amounts involved, certain other provision or restrictions may also apply.
As with a guardianship, the custodian of a minor’s assets has a duty to the minor to protect and preserve those assets. However, the assets may generally be used for the benefit of the minor during the term of their ‘legal disability.’ Once the minor reaches the age of ‘majority,’ (eighteen or twenty-one, depending on the state), the assets will be transferred into their name. In Illinois, the age of majority is currently twenty-one. Transfers under the UTMA are often favored over trusts because of their simplicity. They do not require court oversight or updates, and the entire process is easily accomplished by executing a simple document.
However, unlike guardianships and trusts, there is no judicial oversight to ensure that the custodian of the minor’s assets is acting in the best interest of the minor. This is why the choice of who will be the custodian is a very important decision for a UTMA transfer.
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