When clients want to leave their assets to minor beneficiaries, we almost always will recommend that the assets are left “in trust” as opposed to devising the assets directly to the minor children.
In Florida, assets left directly to beneficiaries will often need to managed as part of a court ordered guardianship. In this situation, the court will choose an individual to be the guardian of a minor’s property. The court will need to approve distributions made on the minor child’s behalf and will require regular accountings, all of which will require attorneys’ fees. This procedure is meant to protect the interests of the minor child, but often becomes an expensive process that drains the assets left for the child’s benefit. When the child turns 18, they are given all assets held by the guardian for their benefit.
To avoid guardianship, assets can be left to a Trustee for the benefit of the minor child. The person who makes the gift (the “Grantor”) chooses who will serve as the Trustee and how the money will be distributed. Holding the assets in trust avoids guardianship and has lower operating costs than a guardianship. The beneficiary is not given assets outright at 18, and distribution terms are stated by the Grantor. Usually, funds are distributed for the child’s health, education maintenance and support and then the child is given a percentage of the principal at a later age. The child often is able to serve as co-Trustee of their trust at a certain age also. By delaying possession of the assets, giving only a portion of the assets outright at a time, and allowing the child to serve as co-Trustee, a Trust allows the beneficiary as chance to learn how to handle money with supervision in order to encourage fiscal responsibility throughout life.
Alternatively, assets can be given to a custodian for the benefit of a minor child under the Uniform Transfers to Minors Act. This names a custodian to hold the assets for a minor beneficiary but does not allow the Grantor to specify the terms of distribution. All assets must be delivered to the child by their 21stbirthday.
While naming a custodian can be a sufficient way to transfer modest amounts of property to minors, a trust is the superior method when the assets in question are significant.