A Child Can Inherit, but Can’t Manage It
A child can inherit money in Massachusetts, but that does not mean a bank or insurance company will hand a substantial inheritance to a ten-year-old. An adult generally needs legal authority to manage it. The question is whether you chose that person and established the rules ahead of time, or whether your family will have to sort that out after you are gone. Simply putting a child’s name in your will or on a beneficiary form does not answer those questions.
Planning for children who are still young? I walk through how to leave money to children in my free online webinar, Wills vs. Trusts. It runs most Wednesday evenings, about 45 minutes plus time for questions, and you can watch from home. See the next date and save your seat.
Being a Parent Is Not Automatic Authority
Parents are often surprised to learn that being the child’s mother or father does not automatically give them unrestricted authority over an inheritance. Caring for a child and managing property that legally belongs to the child are different responsibilities. Depending on the amount, the asset, and the arrangements already in place, a conservatorship may be necessary. In Massachusetts, a guardian generally addresses personal care decisions, while a conservator handles financial matters. The court explains that distinction in its guidance on guardianships and conservatorships.
What a Conservatorship Involves
A conservatorship can provide oversight, but it also brings a court process into something your family may have expected to be straightforward. There can be appointment paperwork, financial reporting, and restrictions on how the money is handled. The parent cannot simply deposit the inheritance into a personal checking account and decide later how much was spent for the child. Records matter because the money belongs to the child, and the person managing it is accountable for what happens to it.
Custodial Accounts Under the Uniform Transfers to Minors Act
A custodial arrangement under the Massachusetts Uniform Transfers to Minors Act is another possibility. An adult custodian manages the property for the child until the law requires it to be turned over. People sometimes assume that always happens at twenty-one, but the termination age depends on how the transfer was made. Massachusetts law provides for turnover at eighteen or twenty-one in different circumstances. The statutory termination rules control, even if the custodian thinks the child would benefit from a few more years of supervision.
Not sure your plan handles an inheritance for a minor? The webinar covers wills, trusts, keeping your family out of probate, and protecting your home and savings from long-term care costs, in plain English. Save your seat for the next one.
The Turnover Age Is Fixed
That birthday is often where parents start reconsidering the arrangement. You might be perfectly comfortable leaving money for college, housing, or help getting established, but less comfortable handing over the entire balance while your child is still figuring out adulthood. A custodial account does not let you keep extending the deadline because your child is having a difficult year. Once the required age arrives, the child is entitled to the property. The amount involved and your expectations should be part of the decision before choosing that approach.
A Trust Gives You More Room to Plan
A properly drafted trust gives you more room to plan. You can choose the trustee, authorize distributions for the child’s needs, and decide whether the inheritance should remain in trust as the child gets older. You do not have to require everything to be distributed at one age. You also do not have to make your child wait until a certain birthday before receiving any benefit. The trust can allow support throughout childhood and adulthood while keeping responsibility for larger decisions with the trustee.
Make the Beneficiary Forms Match
The beneficiary forms need to match that plan. Suppose your trust contains thoughtful provisions for your daughter, but your life insurance policy names her individually. Those insurance proceeds will generally follow the policy’s beneficiary designation, so the trust provisions may never govern that money. The same coordination matters for retirement accounts, although those require additional tax planning. Creating a trust and then leaving the old beneficiary forms untouched can recreate the very problem the trust was supposed to solve.
Don’t Rely on an Informal Promise
We also would not recommend naming a relative personally with the understanding that the relative will “hold it for the kids.” That leaves too much dependent on an informal promise and the relative’s own circumstances. If the money is intended for your child, the legal arrangement should say so. Planning this while you are here gives you the chance to choose who manages the inheritance, explain what you want it used for, and provide instructions that your family can actually follow.
Your Next Step: A Free Online Webinar
Before you name a child as a beneficiary, the best next step is my free online webinar, Wills vs. Trusts. In about 45 minutes, plus time for your questions, I cover the real difference between a will and a trust, how to keep your family out of Massachusetts probate court, and how to protect your home and savings from long-term care costs. It runs most Wednesday evenings, and you can join from your phone or computer. See the next date and save your seat.
