Leaving money, property, and other assets to your children or grandchildren is one of the most common goals of estate planning. But many beginning the estate planning process are surprised to learn that minors cannot legally inherit or control property on their own. So what happens when you wish to leave assets to minors in California?
Leaving inheritance to minor children in California requires special attention because minors cannot legally hold or manage property on their own. In order to legally leave assets to minors, you’ll need to use the right legal tools to safeguard those assets until the minors are old enough to manage them responsibly.
That gives you options, but understanding the tools at your disposal—as well as which is right for your situation—is the key to your children or grandchildren receiving their inheritance as you intended.
At The Law Office of Vidhya Babu, we take pride in helping families understand their options and guiding them through leaving inheritances to minor children in California. Today, we’ll break down everything you need to know about leaving assets to minors under 18 in California law.
Understanding Why You Cannot Directly Leave Inheritance to Minor Children in California
In most states, including California, the law prevents inheritances from being directly left to children under 18. Under California law, no one under the age of 18 can enter into a binding contract or manage significant financial assets, including everything from real estate to bank accounts and investment properties. That is because minors simply do not have the legal capacity or financial experience to manage significant assets on their own.
If someone leaves assets to a minor without a proper plan, the probate court is required to step in.
The court will appoint a guardian of the estate to manage the assets until the child becomes of age. While this is designed to protect the child, it is still a less than ideal situation for the family and the heir.
Some of the primary concerns with a court-appointed guardian of the estate include:
- Families have little control over who the court ultimately appoints
- Guardians must file annual reports
- Fees and administrative costs ultimately reduce the size and value of the inheritance
- The child receives full control at age 18, even if they’re not ready
Avoiding this outcome requires intentional foresight and design for leaving assets to minors in California estate planning. Without it, you lose control over the process, leading to more stress and expense than necessary.
The Best Options for Leaving Assets to Minors in California
The good news is there are multiple options for leaving assets to minors in California that both ensure that their inheritance is protected and that it is transferred at an appropriate time. We’ll discuss the pros and cons of each:
Option 1: Create a Trust for Minor Children in California
For many families, the preferred option is to set up a trust for their minor children in California. A trust is often preferred because it gives parents or grandparents maximum control over how and when their children or grandchildren will receive their inheritance.
By establishing a trust, you can outline exactly how the funds can be used, for example, education, healthcare, and support needs. Trusts can also follow milestone distributions, like reaching age 25, or incentivized distribution, such as graduating college.
With a well-drafted trust, you gain:
- Control: You decide at what age your minor beneficiaries gain access to funds.
- Protection: Trusts can shield assets from creditors, future lawsuits, and even protect against irresponsible spending and management.
- Flexibility: You can stagger or delay distributions, or place conditions on usage.
- Privacy: Establishing a trust avoids probate, and keeps all related matters confidential.
Establishing a trust for minor children in California typically takes one of these forms:
- Revocable Living Trusts (RLT), which take effect when the parent passes away
- Testamentary trusts, which are created via a will, but still require probate
- Special needs trusts, which provide long-term care or disability support for children
These benefits and special uses are why most estate planning attorneys recommend establishing a trust as the best way to leave inheritance to minors in California.
Option 2: Use the Uniform Transfers to Minors Act
If you opt not to establish a trust to leave assets to minors, one option is using the California Uniform Transfers to Minors Act (CUTMA) for children, the legal framework that allows custodial accounts for minors in California.
The CUTMA offers a custodial account that allows you to transfer assets such as cash, investments, and certain property into an account that is managed until the child reaches a legally defined age, up to 25, to allow the child more time to mature before taking possession of the assets.
A CUTMA account offers several advantages:
- Easy to establish
- Low cost
- No need to set up a full trust
- Ideal for modest gifts and smaller inheritances
Using a CUTMA account is a simpler solution than establishing a full trust, but it does have some disadvantages:
- The child receives full control of assets when the account terminates.
- Funds are not protected from creditors after distribution.
- You cannot stagger or delay distributions—once the child reaches the defined age, all assets become the child’s legal property, whether they are ready or not.
CUTMA works best for modest inheritances or short-term management needs, but it’s not ideal for long-term control or larger assets. For this reason, a trust is often considered to be a safer long-term option, especially when there are significant assets and funds at play.
Option 3: Court-Appointed Guardianship of the Estate
If you pass without creating any form of estate plan for leaving inheritance to minor children in California, the probate court must appoint a guardian of the estate to manage any inheritance left to a minor.
While legally valid, this is essentially a fall-back option for those who have not planned ahead adequately. The key disadvantages for court-appointed guardianship include:
- Requires court oversight.
- Includes strict accounting requirements, including annual reporting.
- Potential delays in accessing funds.
- Significant attorneys’ fees and administration costs that can reduce the inheritance.
- All assets become fully available to the child when they reach age 18.
Many families seek to avoid this outcome because it strips away control and can result in major administrative burdens. When considering how to leave assets to minors, most estate planning attorneys recommend against this option and instead suggest that either option 1 or 2 be used.
How to Leave Specific Types of Assets to Minors
Many parents or grandparents choose to leave certain assets to their children or grandchildren, which require different methods of transfer. We’ll break down how to leave these specific asset types to minors:
Real Estate
In nearly every case, it is best to leave real estate assets in a trust, rather than naming a minor as the direct beneficiary.
Under a trust structure, trustees (the ones responsible for managing the trust) can:
- Maintain the home
- Rent it out and generate additional income
- Sell the home if needed and use the proceeds for the child’s care
A trust is the best way to secure the home for the child, without being forced into court-ordered guardianship, or delaying other essential decisions.
Life Insurance Policies
It is common for parents to name their minor children as beneficiaries on life insurance policies, but this creates a legal obstacle as insurance companies cannot pay benefits directly to a child.
Instead, the best course of action is to create a trust for the minor, or establish a CUTMA custodianship.
This will avoid court intervention and ensure the funds are responsibly managed for the child until the appropriate time.
Retirement Accounts
401(k)s, IRAs and other retirement plans function similarly to life insurance policies, in that their benefits cannot be paid directly to a child. Leaving them to a trust streamlines the process and allows the parent to control the distribution of the assets.
Bank Accounts and Cash
Relatively small cash gifts can be left in a CUTMA account, but if the inheritance is significant or is intended for long-term support, a trust offers greater protection and control.
What Is the Best Way to Leave Inheritance to Minors in California?
There is no single best way to leave inheritance to minors in California. The right approach depends on your specific situation, including your assets, family dynamics, long-term goals, and how much oversight you want in place.
But in nearly every case, relying on court-appointed guardianship is the least ideal situation because it strips away all control from you, and can result in significant administration expenses.
Instead, it’s best to utilize some form of planning:
- Trusts: Best for larger inheritances, or those that include real estate or long-term control.
- CUTMA: These custodial accounts are often sufficient for smaller cash gifts or simple transfers.
No matter your circumstances, when it comes to how to leave assets to minors in California, the goal is the same: protect your children or grandchildren’s future while ensuring a smooth, private, and cost-effective transition.
The Law Office of Vidhya Babu: Your Guide to Leaving Assets to Minors
Leaving assets to your minor children requires more than simply naming them in your will. California law requires extra steps to ensure that minors are protected, but with the right planning, you can ensure that your children are set up to receive the financial support you intend at the right time in their lives.
Whether you’re considering a trust, CUTMA account or other strategy, The Law Office of Vidhya Babu is here to help.
We guide Bay Area families through every step of how to leave assets to minors in California, and help them build comprehensive estate plans that safeguard their assets now and in the future.
Contact us today to start your estate planning process, and let us give you peace of mind that your children’s financial future will be handled with care.
**DISCLAIMER**
This blog post is for informational purposes only and does not constitute legal advice. Please consult with an attorney to discuss your specific circumstances.