This week’s question:
My husband and I are working on our estate plan with a living trust as the centerpiece and we have in mind to leave some money to our grandchildren. Is this possible without a lot of red tape including legal expense?
We in California are fortunate to have a relatively easy way to leave money or even real estate to minors.This can be done in a variety of ways.Let me explain a bit.
First of all, you will want to work with your own attorney in this process, part of which is the drafting of a living or revocable trust.I would not go down to a stationary store or go online to print out some papers and fill in the blanks.
Within a living trust, you can specify that certain items pass to certain individuals even though they are not yet 18 years of age.The various rules are included in California Probate Code §3900-3925, called the California Uniform Transfers to Minors Act.
You can go online and enter that law in your favorite browser and hit “go”.The various provisions should be up on your screen in a very short time.
The person in charge of the gift for the minor is called a “custodian”, an adult of course.Under the Uniform Act, the gift can be completed at any age from 18 to 25.
Keep in mind that as long as you are alive, your revocable living trust is just that, you can change your mind at any time for any reason.
Under the Uniform Act, on the other hand, you would name one adult to be the custodian for the minor, and the gift is somewhat irrevocable.You would also probably want to name one or more alternates, or backups, just in case the named custodian cannot or would not serve for some reason.
The custodian for the minor could be the same person as the trustee of your trust or a different person.So, you could have one trustee of the trust and multiple custodians for different minors.
Virtually all forms of property may be gifts to minors, including money, securities, life insurance proceeds, annuity contracts, real estate, and other forms of tangible personal property.
The custodian is charged with several duties for the minor’s property under Probate Code §3912, including the duty to take control of the property, register or record title to custodial property if appropriate, and collect, hold, manage, invest, and reinvest custodial property.
Under that law, the custodian is also obligated to follow the standard of care that would be observed by a prudent person dealing with property of another.
You will want to give some thought as to the name of the person to be custodian of the property, since that person will have a lot of discretion and flexibility in dealing with the minor’s property.There are few restrictions on the custodian’s power to use custodial funds for the benefit of the minor.
It is also important to note that the custodian is not supervised by any court under normal circumstances.In some cases, a court petition might be available to compel a custodian to distribute funds or to compel an accounting, but normally the custodian has a lot of freedom to act.
If you state that the gift to the minor is to governed by the California Uniform Transfers to Minors Act, it is somewhat restrictive or rigid in its terms.
In your living trust on the other hand, you may want to specify other terms, such as the principle being payable in stages.For example, 1/3 payable at 21, 1/2 at 25, and the balance at 30, so that the gift is spread out equally over a period of years by the trustee with payments during the intervening years for support, education, and basic needs.
With a little more flexibility in your trust, you as settlor of your trust can provide more freedom for your successor trustee to suit the beneficiary’s particular needs with your wishes and objectives.
Under the Uniform Act you are also faced with restrictions as to where the gift goes if the minor does not survive, whereas with your living trust, you have other options.
It is for those reasons why a visit with your own attorney may prove quite beneficial, instead of just filling out a mass-produced form.
Best wishes in your estate planning work, Ashley.I’m sure you will find your project is quite worth while.
/s/Donald J. DeVries
You can reach Mr. DeVries with your questions by email at firstname.lastname@example.org, with “Almaden Times” in the subject line, fax at (408)268-6502, telephone at (408)268-9500, or mail at DeVries Law Office at 6475 Camden Avenue, Suite 200, San Jose, CA 95120.Your name will not be used. No attorney-client relationship is created by these articles.