When a minor child receives an inheritance, parents or guardians must take thoughtful steps to ensure the assets are protected and benefit the child in the long run. This is the case, no matter how much money the child inherits. However, special considerations are required when the amount exceeds $15,000 due to legal and tax implications. Read on to learn about what to do when this happens.
Understanding the Inheritance Amount
Start by gathering all of the information about what your child will inherit. Inherited assets can come from several sources, including cash, real estate, stocks and more. Depending on how organized the decedent was, you may need to do some digging to find everything. Once you are confident you have collected everything, add up the amounts.
Then, consider the following if the total is greater than $15,000:
- This amount may trigger federal gift tax reporting requirements for the donor.
- A court may require the appointment of a guardian of the property to manage and safeguard the inheritance until the child turns 18.
- You cannot simply deposit the funds in a custodial account without court approval if the amount surpasses this threshold.
Steps to Take When Your Child Receives an Inheritance
Now that you understand how much your child has inherited and the potential implications, here are the next steps you may need to consider:
Consult with an estate planning attorney.
Work with an experienced estate planning attorney to figure out the best legal structure to protect your child’s inheritance. This is an essential step, no matter the size of the inheritance.
Petition for a guardian of the property (if needed).
If the inheritance exceeds $15,000, a petition to the court to appoint a guardian of the property will be required. A guardian of the property is appointed by a court to manage the child’s finances until adulthood. This is separate from a guardian of the person, who is responsible for the child’s day-to-day care.
Prepare an inventory of assets.
As part of your case, you or your estate planning attorney will need to present an inventory of assets to the court. This ensures that everything is properly documented and nothing falls between the cracks.
Establish an account or trust.
One way your estate planning attorney will come into play is by opening an estate account or a trust to hold the inherited assets. You cannot simply open this type of account without court approval if the inherited amount exceeds $15,000.
Keep accounts up to date and monitored.
File the appropriate tax documentation each year, and monitor ongoing tax obligations. Make sure funds are used only for the child’s benefit, and maintain detailed records for accounting and court review.
When your child receives an inheritance, you have the power to keep them financially protected until they become an adult. An experienced estate planning attorney can help you determine how best to proceed when this happens. Eastham Law Offices has decades of experience helping parents build financial safeguards for their children. Call us at 561-395-6800 or fill out our online contact form to schedule a consultation.
This blog is for informational purposes only, is not legal advice, and does not create an attorney-client relationship.