Managing assets for a minor child requires careful planning. Children under 18 cannot legally own property or manage financial accounts on their own. Without proper planning, a court may need to appoint a conservator to handle your child’s inheritance, creating unnecessary costs and delays.
At W.B. Moore Law, we help parents and guardians create estate plans that protect their children’s financial future while maintaining flexibility and control.
Why Minors Can’t Inherit Directly
Colorado law prohibits minors from directly controlling significant assets. Financial institutions won’t allow a child to manage accounts, sell property, or make investment decisions. If you leave assets to a minor without establishing a management structure, the probate court will step in.
The court-appointed conservator must file regular reports, seek court approval for major decisions, and post a bond. These requirements add expense and administrative burden. The conservatorship automatically ends when the child turns 18, at which point they receive full control of all assets regardless of maturity level.
This sudden access to wealth concerns many parents. An 18-year-old may lack the experience to manage a substantial inheritance responsibly.
Trusts For Minor Children
A trust offers the most flexible and comprehensive solution for managing a child’s inheritance. You can create a trust within your will (testamentary trust) or establish a separate trust document during your lifetime (living trust).
The trustee you appoint manages assets according to your instructions. You decide when and how distributions occur, what expenses the trust covers, and at what age your child gains full control.
Common Trust Distribution Approaches
Parents structure trusts in various ways depending on family circumstances and values:
- Age-based distributions: Release portions at specific ages, such as one-third at 25, one-third at 30, and the remainder at 35
- Milestone distributions: Tie releases to achievements like college graduation or starting a business
- Discretionary distributions: Give the trustee authority to distribute funds based on the child’s needs and circumstances
- Income only: Provide regular income while preserving principal until a later age
Some parents prefer staggered distributions that give children opportunities to learn financial management with smaller amounts before receiving the full inheritance. Others maintain trustee discretion throughout the child’s life if they have concerns about substance abuse, financial irresponsibility, or other issues.
Choosing A Trustee
Selecting the right trustee matters tremendously. This person will make financial decisions affecting your child for years or even decades. The trustee should be financially responsible, trustworthy, and willing to serve in this role.
Many parents name a trusted family member or close friend. Others prefer a professional trustee such as a bank trust department or trust company, particularly for larger estates or complex situations. You can also name co-trustees who serve together, combining family involvement with professional expertise.
A Loveland will lawyer can help you think through trustee selection and include provisions for successor trustees if your first choice cannot serve.
Custodial Accounts Under UTMA
The Uniform Transfers to Minors Act (UTMA) provides a simpler alternative to trusts for smaller inheritances. Under Colorado’s UTMA statute, you can name a custodian to manage assets for a minor until they reach age 21.
UTMA accounts work well for moderate amounts but have limitations. The child automatically receives all assets at 21 with no exceptions. You cannot extend control beyond that age or create custom distribution schedules. UTMA also offers less asset protection than trusts if the child faces lawsuits or creditor claims.
For estates where each child might inherit $50,000 or less, UTMA often provides sufficient protection without trust complexity. Larger inheritances typically warrant the additional control and protection a trust provides.
Guardian Vs. Trustee Roles
Parents often confuse guardians and trustees. A guardian raises the child and makes personal decisions about education, healthcare, and daily life. A trustee manages financial assets.
You can name the same person for both roles or select different individuals. Some parents separate these responsibilities to provide checks and balances. The guardian requests funds from the trustee for the child’s needs, and the trustee reviews these requests.
This separation prevents any single person from having complete control over both the child and the money. It also allows you to choose the best person for each specific role.
Life Insurance And Retirement Accounts
Life insurance and retirement accounts pass through beneficiary designations, not your will. Never name a minor child directly as beneficiary on these accounts. The insurance company or plan administrator cannot distribute funds to a child, forcing a court conservatorship.
Instead, name a trust as beneficiary. If you’ve created a trust for your child in your estate plan, coordinate your beneficiary designations to direct these funds into that trust. A Loveland will lawyer can help align all components of your plan.
Special Needs Considerations
Children with disabilities require different planning approaches. A direct inheritance may disqualify them from government benefits like Supplemental Security Income or Medicaid. A properly drafted special needs trust preserves benefit eligibility while providing supplemental funds for quality of life improvements.
These trusts follow specific legal requirements. The trustee can pay for expenses that government benefits don’t cover, such as therapy, education, recreation, and personal care items.
Updating Your Plan
Review your estate plan as children grow. The trust structure appropriate for young children may need adjustment as they mature. Adding subsequent children, changes in family circumstances, or shifts in your financial situation all warrant plan updates.
Marriage, divorce, relocation to another state, and changes in tax law also trigger the need for review. Regular check-ins help keep your plan current and effective.
Protecting Your Child’s Financial Future
Planning for minor children involves more than deciding who raises them. The financial structure you create shapes their opportunities and security for years to come. We work with families throughout Colorado to develop estate plans that protect children while teaching financial responsibility. Contact our team to discuss strategies for managing assets for your minor children and creating a plan that reflects your family’s values.