In our firm, we often encounter clients who overlook a critical aspect of their estate planning: the designation of minors as beneficiaries. While it may seem intuitive to name children as heirs to one’s assets, Washington state law presents significant hurdles to this approach. Minors, by legal definition, are incompetent to inherit anything directly. Therefore, relying solely on a simple beneficiary designation for a minor could lead to unintended consequences and potential complications down the line.
Here’s why you shouldn’t name a minor as a beneficiary:
Legal Incompetence of Minors:
- Under Washington state law, minors lack the legal capacity to inherit property or assets directly.
- Without proper planning, assets left to a minor may be subject to court supervision until the child reaches the age of majority, leading to delays, expenses, and potential disputes.
And here is what you can do instead to protect your child’s inheritance:
1. Uniform Transfers to Minors Act (UTMA):
- The Uniform Transfers to Minors Act provides a framework for gifting assets to minors through a custodian.
- By establishing a UTMA account, you can designate a custodian to manage assets on behalf of the minor until they reach the age of majority, typically 21 in Washington state.
- UTMA accounts offer flexibility and control over how assets are distributed while ensuring that they are used for the minor’s benefit
2. Setting Up a Trust:
- Creating a trust is another effective way to protect assets intended for a minor beneficiary.
- A trust allows you to specify detailed instructions for asset management, distribution, and use on behalf of the minor.
- By appointing a trustee to oversee the trust, you can ensure that assets are managed responsibly and in accordance with your wishes, even beyond the minor’s attainment of legal adulthood.
Proper estate planning, including the use of UTMA accounts or trusts, can help avoid the need for court intervention in the administration of assets for minors. By proactively addressing the issue of minor beneficiaries, you can minimize delays, expenses, and potential disputes that may arise in the absence of a clear plan.
In conclusion, while it may be well-intentioned to name minors as beneficiaries in your estate planning documents, it’s essential to understand the legal limitations and potential pitfalls associated with this approach. By utilizing tools such as UTMA accounts or trusts, you can protect your child’s inheritance and ensure that it is managed responsibly until they reach the age of majority.
Don’t hesitate to reach out to our firm at (206) 408-8158 to help you navigate these complex issues and develop a comprehensive plan that meets your family’s needs and objectives. To learn more about our services, visit our YouTube channel: https://www.youtube.com/@dallawfirm.
