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Limitations on Minor Children Inheriting Directly in Florida

On Behalf of | Jun 15, 2020 | Elder Law, Estate Planning, Guardianship |

Often parents and grandparents name minor children as beneficiaries under their Will or their life insurance or IRA. As a matter of law, children are allowed to inherit but how they receive that inheritance and how it is administered can pose challenges and unnecessary expense, especially if the amount to be received exceeds $15,000. For this reason, good estate planning can help.

Section 744.301, Fla. Stat. provides that if the amounts received in the aggregate do not exceed $15,000, a parent, as natural guardian of his or her minor children, may:

  • Collect, receive, manage, and dispose of the proceeds of any settlement;
  • Collect, receive, manage, and dispose of any real or personal property distributed from an estate or trust;
  • Collect, receive, manage, and dispose of and make elections regarding the proceeds from a life insurance policy or annuity contract payable to, or otherwise accruing to the benefit of, the child; and
  • Collect, receive, manage, dispose of, and make elections regarding the proceeds of any benefit plan as defined in s. 710.102, of which the minor is a beneficiary, participant, or owner (such as an IRA).

In Florida, if a minor is to receive an aggregate amount less than $15,000, then the parents can receive the assets or money for the child. If a minor is to receive an aggregate amount of $15,000 or more, then a guardianship of the property  must be established for the minor. If you’ve dealt with guardianship, you know that it is expensive, slow, and a “pain in the neck.” The process involves a court proceeding. Because court approval is required in most instances when money is distributed, a guardianship often causes a slow-down in funds being available for the minors. Because the guardian must have an attorney, cost becomes a consideration. Having to file certain annual guardianship paperwork becomes an aggravation. Overall, the simple fact is that guardianship is something to avoid. Much like probate, guardianship is something that good estate planning can by-pass.

One of the most effective ways of allowing minors to inherit and at the same time to avoid guardianship is to set up a revocable living trust (“Trust”). When a Trust is set up, minor children can be named as beneficiaries of the Trust. When money or assets are received at the death of a loved one, the Trustee of the Trust can hold and administer them as provided in the Trust. No guardianship is necessary. What’s nice about the Trust is that it can be named as beneficiary of all types of assets—including life insurance, financial accounts and retirement accounts. Certain assets, like real estate, can also be re-titled in the name of the Trust.

Often the person setting up the Trust will leave instructions on how assets received into the Trust are to be distributed. The Trustee will hold the assets for each beneficiary until a specific landmark—such as an age or accomplishment (such as graduating college). In the meantime, the Trust can authorize the Trustee to use the assets of the Trust for HEMS, i.e. health, education, maintenance and support of the beneficiaries.

An example may help see the benefit of how this works. Alice and Tom have three very young children. After naming each other, they wish for their children to receive all of their estate, including proceeds from their house, bank accounts, brokerage accounts, life insurance, and RA’s—all of which total over $600,000. If Alice and Tom die in a car accident and have no Trust in place, a guardianship for each of the three separate children will have to be set up. This will take time, money, and will cause unnecessary headaches. However, if Alice and Tom have established a Trust and have named the Trust to receive all of their assets, they avoid  not only probate but also guardianship.

Alice and Ted can then put specific instructions in the Trust so that the Trustee knows how to distribute the funds. Their Trust might include an instruction like this:

Upon the death of the last of us to die, the Trust share of any beneficiary of this Trust shall be distributed outright if said beneficiary has reached age 25. If a beneficiary has not reached age 25 at the time for distribution, then said beneficiary’s trust share shall vest in interest indefeasibly and shall be held in trust by the Trustee and shall distributed to said beneficiary upon reaching age 25. Meanwhile, until a beneficiary of this Trust has reached age 25, the Trustee may use as much of the income and principal of said beneficiary’s trust share for the beneficiary’s health, education, maintenance and support, as the Trustee, in his or her sole and absolute discretion, determines is necessary or required.

Setting up a Trust requires certain expertise and advice. As a result, it is best to consult an experienced estate planning attorney. He or she can guide you through the process and make sure that your Trust accurately sets forth your wishes.


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