For many parents, writing a will, funding a trust, or simply updating a life insurance policy is a proactive and time-tested way to protect their children from uncertainty. A new addition to the family should always serve as a reason to either make an estate plan or revise an existing one, if only to ensure that a child is afforded some support if their mother or father dies unexpectedly or is incapacitated.

However, the rules governing inheritances are very different when the intended recipient is a minor. Depending on the amount left behind, a child’s inheritance could be turned over to a court-appointed guardian or even invested in a county treasury.Children and inheritances | California Estate Planning Lawyer

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Child Inheritances in California

Receiving a California inheritance could seem deceptively straightforward. Provided that there are no unexpected probate contests or trust challenges, beneficiaries can typically claim their share in an estate as soon as administration has concluded.

However, the rules of succession are different when underage children are involved.

While children still have a right to inherit, Golden State legislators have passed certain laws intended to protect children from financial predation. These rules vary, and they are usually adjusted in accordance with the assessed value of an inheritance.

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.

Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.