Transferring Property to Minors
Date posted: June 9, 2014
NYS Estate Tax Alert »
When you meet with your estate planning attorney to discuss ownership and management of property it will always require contracts to be involved. Generally, minors cannot enter into contracts. Therefore, usually minors cannot manage or own property. Sometimes minors may not even be able to receive property.
There are some practical exceptions that Schwartz Fang & Keating P.C. will be able to help you utilize. Most businesses will sell to minors up to a certain dollar amount. Minors can own tangible property such as a bicycle or clothing.
However, generally as a minor cannot contract, there is often a non-direct transfer arrangement when another person (adult/bank/trust company) owns/manages the property until the minor reaches majority or older. Minority may be different ages in different jurisdictions or circumstances (i.e. age 18 or 21).
Practically, someone with legal capacity owns and manages the property on behalf of the minor. Uniform Transfer to Minor Act/ Uniform Gift to Minor Act (UTMA/UGMA) Accounts are a simpler and less expensive arrangement than a transfer in trust. However, the UTMA/UGMA has less control over management, investing and spending than in a trust. In addition, UTMA/UGMA accounts cannot hold certain property. For instance, an interest in a family business may need very formal and relatively restrictive forms of transfer which is offered in a trust. A trust may accept this form of asset.
Some donors may think the beneficiary is mature enough and be responsible to directly own assets and manage them. Others may rather defer the time when a beneficiary receives assets and becomes the full title owner for a myriad of reasons including protection from creditors, predators and protecting the beneficiary from themselves. A beneficiary may unfortunately have problems or simply may be a spendthrift.
It is important to understand that each case presents its own facts and circumstances. Not every plan will fit every person. Details about the family are important to share with your attorney so that several perspectives may be considered.