Access to Money Children Inherited Prior to Age of Majority

hands around piggy bank{Read in 5 minutes}  When a deceased leaves money to a minor in their Will, they should consider several issues. They should consider whether or not the money should be held in a testamentary trust until the beneficiary reaches a certain age, which may be managed by the same person that raises them if their parent is also deceased.

So, good planning can be a wonderful thing — however, sometimes people don’t adequately plan and a minor inherits money directly. This can be because:

– the minor is listed as a beneficiary under a life insurance policy or retirement account;

– the person died intestate, so there is no Will addressing how the beneficiary receives the money; 

– the person had a Will (perhaps a do-it-yourself Will) but didn’t adequately address it;

– the decedent died as a result of someone else’s negligence and there is a lawsuit that nobody had foreseen where the funds are paid directly to the minor beneficiary.

In any of these scenarios, the court will direct that the funds be paid to a guardian of the property for a minor to the extent that they exceed $10,000. The guardian of the property may or may not be the same person as the minor’s parents — parents are the natural guardians, but in order to receive funds on behalf of a minor beneficiary or large sums of money on behalf of a minor beneficiary, they must also become the minor’s legal guardians. Very often, these funds wind up in a bank account held jointly with the Clerk of the Court, which forbids the withdrawal of funds without a Court Order authorizing the same.

Under what circumstances might someone wish to make an application to the Court to withdraw money and under what circumstances might a Court grant that? Well, consider why the minor would need access to the money; perhaps there are extraordinary expenses that the minor may have. For example:

– a decision to attend a private school rather than a public school;

– college tuition if the minor is an advanced student who has skipped one or more grades; 

– the purchase of a used car to get back and forth to work;

– an opportunity to study abroad; or

– a specialized (but rather expensive) summer camp.

The Court would receive an application via the parent or guardian filling out the application, and where the minor is at least 14 years old, the minor signing it and consenting to it. The Court then considers whether or not these are things that the minor should pay for themselves (out of the minor’s funds held by the Court) or whether someone else should be paying these expenses. For example, if the person making the withdrawal request is the minor’s parent, New York law obligates parents to provide for their child’s necessary expenses, such as food, clothing, shelter, education, etc.

If the Court receives a request from a parent, the Court will want an explanation concerning why the parent is unable to afford these expenses themselves, or pay it from their own money rather than the child’s. Again, the Court is trying to zealously safeguard all of the minor’s money to return as much of it as possible — ideally all of it, including the interest that accrued before the minor’s 18th birthday — back to the minor. However, in situations where the minor’s assets are significant and/or the parents do not have income or assets of their own to otherwise make such an expenditure, the Court will often allow the withdrawal of funds, assuming that it deems it to be in the minor’s best interest. The Court is not trying to deny the minor any opportunities, but rather make sure that the minor isn’t paying for things that are someone else’s responsibility.

My advice for those people making applications to withdraw funds? Make sure that the forms are filled out completely and provide supplemental information to the Court, which will be helpful when considering the application. For requests to pay for specific things, include an invoice. If it is an expensive item, consider showing alternate costs for it to show that the funds requested represent the best-quality item or service at the lowest possible price. Also, if the parent is requesting something for which they have a legal obligation of support, the parent should explain on the form why they are unable to afford it themselves and ask the Court to consider allowing withdrawal of the funds to not deny the child the item or experience.

For more information on this topic, please contact me. 

Thomas Sciacca

 

Thomas Sciacca

www.sciaccalaw.com
Tom@SciaccaLaw.com
(212) 495-0317