If you have a last will and testament, and leave money to your child who’s under 18 when you die, that money is held by your child’s guardian until your child turns 18. So, at age 18, your child could inherit the proceeds from the sale of the house, your retirement plan, etc. Even if you do not consider yourself as “wealthy,” you have a decent chance at leaving assets to someone who–at age 18–is not likely mature enough to deal wisely with the inheritance. You have probably heard of trusts where the trustee holds assets in trust for your child and distributes assets as you state at different ages (typically 25, 30, and 35). Another option you might not know about are Uniform Transfers to Minors Accounts, or UTMAs.
UTMA accounts are custodial accounts that hold money for a beneficiary (i.e., a minor child) and postpone a child’s receipt of the inheritance or gift at a chosen age, anywhere between 18 and 25 (Ohio law). You must choose the preferred age either in your will or in the instrument of transfer, and if you do not choose an age then the state of Ohio defaults to age 21. UTMAs are a way to build tax-free savings for a child but the assets in the custodial account will be counted as part of the custodian’s taxable estate until the minor takes possession. If you are setting up a UTMA account, you choose who will serve as custodian and you can name yourself.
If you want to extend financial disbursements beyond age 25, or want more control in the way the money is disbursed, then a trust is a better option for you. A trust provides maximum control over how, when and to whom your assets are distributed.
If you have any questions about UTMA accounts, trusts, or options on how to leave assets to your children, please email me at firstname.lastname@example.org.