When a minor inherits property in Illinois, how that property will be dealt with depends on whether the decedent (the person from whom the property is inherited) dies with a will, with a trust, or without either (intestate). In this article, we will explain the results of the different potential scenarios.
In the absence of a will or trust, the decedent’s estate will go through probate. The probate court will appoint a guardian of the minor child’s estate. This person will be responsible for managing the inherited assets of the minor until the minor reaches age 18, at which point the remaining assets will be paid out to the child. The guardian of the estate will have the duty to preserve as much of the inheritance as possible for distribution to the child when the child reaches the age of majority. He or she will be required to report periodically to the probate court until the assets are finally distributed and seek court approval for certain types of transfers. The guardian of the estate may be a different individual than the guardian of the person (the individual with custody over the guardian). However, in the absence of a will or trust naming a specific person as the guardian of the estate, the guardian of the person will often be named the guardian of the estate. This is undesirable for divorcees who do not necessarily want their ex-spouse, who will likely be the custodial parent and guardian of the person, to have control of their property.
A will allows you to have some control over how the assets inherited by minor beneficiaries are managed after your death, although not as much control as a trust. In a will, you have the ability to name both a guardian of the person and a guardian of the estate for your minor children. If you are a divorcee, your wishes with respect to guardianship of the person will likely be overridden if there is a surviving parent available to take custody. However, you can provide that someone other than the surviving parent will be guardian of the estate, with the responsibility of managing the inherited assets.Alternatively, a will allows you to appoint a custodian for the assets under the Illinois Uniform Transfer to Minors Act. Like a guardian of the estate, a custodian has the duty to manage the assets for the benefit of the beneficiary child. However, unlike a guardian of the estate, the custodian is not required to report periodically to the court or to seek court approval over certain types of transfers. In addition, while guardianships are terminated at age 18, custodianships are terminated at age 21. Unlike the trustee of a trust (discussed below), a custodian’s discretion in managing the assets is not constrained by the wishes of the decedent.
Using a revocable living trust, the trustee can name a trustee to manage the assets of the child. Like a custodian or a guardian of the estate, the trustee has a fiduciary duty and the discretion to manage the assets of the beneficiary. Like a custodianship, a trust does not require court oversight. However, a trust allows its creator greater control over the management of the assets after he or she has passed. The creator of a trust can be very creative in instructing the trustee how he or she wants assets invested or paid out to the beneficiaries. Unlike a custodianship or guardianship, trust assets need not be paid out to the beneficiaries at age 18 or 21 respectively. Often, my clients will choose to have 1/3 of trust assets payable to the beneficiary at age 21, 1/3 at age 25, and the remainder at age 30, with the trustee retaining discretion to to pay more if necessary for the benefit of the child.
For further discussion of the uses of trusts and wills, please refer to our previous article: Trusts and Wills: Which is Right for You?