If a child inherits $5,000 or less, for instance, the surviving parent or guardian may assume control of the inherited estate assets. These assets may then be turned over to the child once they have reached the age of 18.
Larger inheritances, though, are somewhat more complicated. Possibilities include:
The Money Being Placed in a Trust
If the parent established a trust for their child, they likely nominated a successor trustee. The successor trustee then has a legal obligation to manage the trust’s funds responsibly. Once the child reaches 18—or another age specified in the trust formation document—any remaining assets may be turned over to the child.
Court-Ordered Guardianship
If the deceased parent did not establish a trust, the court may order the creation of guardianship of the estate. The child’s inheritance is placed into the guardianship, which will be managed by a court-appointed guardian.
Surviving parents can sometimes petition the court to assume control over the guardianship, but they will be required to file regular reports showing that they are managing the guardianship’s funds responsibly.
UMTA Disbursals
The California Uniform Transfers to Minors Act (UTMA) allows a minor child to receive money without the need for a trust or guardianship. Instead, the child's inheritance will be managed by an authorized custodian. The custodian's role is similar to that of a guardian or trustee, insofar as they must responsibly manage the inheritance and make decisions in the child's best interest.
UTMA accounts are typically easy to establish, and they can help minimize the heir’s tax burden. However, UTMA-based inheritances cannot be conditioned, and they do not carry over to adult heirs.
