A very common mistake clients make, in their estate planning, is that they name grandchildren, or other persons under the age of 18, as the beneficiary of their retirement accounts, annuities, or other investments. Since persons under the age of 18 can not legally inherit assets in New York, and in most other states, this creates a serious problem. Institutions are not permitted to disburse monies to minors; rather, they will normally require that someone be legally appointed as guardian of the minor in order to receive the funds. That the minor has parents is not sufficient–the parents will be forced to commence legal proceedings in order to be appointed guardian for the purpose of accepting funds.
While it is certainly understandable that one wants to provide for grandchildren, the proper way to do so is by preparing a will that provides for a trust to receive the assets at least until the child attains the age of majority. When the person’s will is probated, the trust will be created and it provides an relatively easy vehicle for receiving inherited monies. Most people would agree that even 18 is too young for a child to inherit, and thus provide that a trust be created for any person under a certain age. It is more customary to provide for children to inherit starting at a much later age, with the trustee being able to use money freely for the child’s health, education and welfare.