Management of Property Inherited by Minors in North Carolina

Minors can be beneficiaries, but until a child reaches the age of eighteen (18), they cannot inherit property in their own name.  Rather, an adult must manage that property until the minor comes of age and can manage it for themselves.

There are several ways a child can inherit property.  If a person dies and leaves behind a will or a trust, and names a child as a beneficiary, then it will be the trustee’s job to manage that child’s property according to the terms of the document.  If a person dies and makes a gift to a child under the state’s Uniform Transfers to Minors Act (UTMA), the child’s money will be placed in a custodial account for that child’s benefit to a certain age.  A minor may also be an heir under North Carolina’s intestacy laws if no will exists.  Finally, if a person dies and leaves money to a minor directly or names the minor as a beneficiary of a life insurance policy or retirement account, a court will need to appoint a guardian of the estate or a general guardian to manage that child’s money to age eighteen.

Before leaving property to a minor in your will, consult with an estate planning attorney to make sure you fully understand the legal consequences of an action. In general, a minor child can receive property as a trust beneficiary or by having a custodian or guardian manage the property.

Trusts for Minor Children

The major benefit of creating a trust is having the power to control how and when the funds are used and distributed.  An experienced trusts and estates attorney can help you create a trust that will benefit your children and specifically direct how the funds should be used.  A trustee of your choice oversees managing the trust and distributing the funds according to the trust document.  For example, you may wish for the trustee to use funds for your child’s support until they reach the age of twenty-one (21), at which time your child would have control over the funds.  You can leave detailed instructions that must be followed precisely. Trust assets also avoid the probate process, which is a matter of public record and can often be time-consuming and expensive.

What if a Child Receives Property Outright?

If you bequest property to a minor child and have not created a trust, then the court will appoint a guardian to manage the assets until the child turns eighteen (18).  At that time, the child will receive the property and can do whatever they please with it.  There are a few drawbacks to this situation.  First, you don’t know who the court will appoint to manage the funds.  Also, you must consider whether your child will be able to handle the responsibility of managing the property on their eighteenth birthday.  Once they come of age, there will not be anyone monitoring their actions or controlling how they use inherited assets, and not every child will make wise financial decisions at this age.

NCGS § 35A-1227 sets out four procedures that may allow funds of a minor to be managed without the need for a guardianship of the estate or a general guardianship.

1. Insurance Proceeds or other funds to which a minor is entitled may be administered by the clerk or the public guardian pursuant to § G.S. 7A-111 if the amount of the funds is under $25,000.00
2. A devise of personal property to a minor may be distributed to the minor’s parent or guardian up to the dollar amount as provided in § G.S. 28A-22-7
3. A personal representative or collector who holds property due to a minor without a guardian may deliver the property to the clerk pursuant to § G.S. 28A-23-2
4. Intervivos or testamentary transfers to minors may be made and administered according to the North Carolina Uniform Transfers to Minors Act, Chapter 33A of the General Statutes.

If you have concerns about how to leave property to your children and/or grandchildren and control how the assets are used, talk to a North Carolina estate planning attorney.  At Harvell and Collins, we understand that every estate plan must be uniquely drafted.  Our goal is to guide you through this process and listen to all your concerns.