MSTR Cat

Trust Law/Level II · Do you need one?/2.3 Choosing the people/Lesson 5

Minors and money

Why children cannot manage property themselves, and who looks after their money until they can.

Education, not legal advice. Trust law changes from country to country and state to state, and the right structure depends on your situation. Anything you sign should be drafted or reviewed by a qualified lawyer where you live.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Name a Uniform Transfers to Minors Act custodian in your will or trust; it avoids court guardianship, and California lets you set delivery as late as 25 for such transfers (Probate Code §3920.5). Catch: the young person then takes everything outright.
  2. Nominate a guardian of the person in your will, including the free California statutory form. Catch: the court makes the final appointment, and a will alone does not manage the money, so pair it with a custodian or trust.
  3. Annual gifts up to $19,000 per child per donor (2026) into a custodial account need no gift tax return. Catch: such gifts are irrevocable and become the child’s property, delivered at the state’s set age.
  4. For a disabled child, an ABLE account shields up to $100,000 from SSI resources, and from 2026 covers disability beginning before 46; yearly contributions are capped at the gift exclusion ($19,000). Catch: Medicaid can be repaid from the balance at death (IRC §529A(f)).
  5. For larger sums or a disabled child, a third-party supplemental needs or staged trust holds money past 21 and protects benefits. Catch: a trust holding the child’s own money must meet 42 U.S.C. §1396p(d)(4)(A), with state payback at death.

MaterialsA copy of your state’s Uniform Transfers to Minors Act (UTMA) statute pageThe name and contact details of a potential custodian or trusteeA simple spreadsheet tracking the child’s age milestones for distributions

Wonder

  1. What happens if my chosen guardian dies before the child turns eighteen?
  2. Does money in a trust count against the child’s future government benefits?
  3. Can I change who manages the money after I sign the document?

Explore

  1. In the US, a minor can own property, but generally lacks legal capacity to manage it: a child cannot validly sign most contracts, sell land or deal with an account alone. If a house is deeded to a ten-year-old, the child may own it, but selling or mortgaging it can require a court-appointed guardian. That is why an adult intermediary is usually needed: a custodian, a guardian of the estate, or a trustee, who holds or manages the property for the child until adulthood or a later age set by law or the document.
  2. Under a state’s Uniform Transfers to Minors Act (UTMA), you can name a custodian to hold property, such as cash, securities or other assets, for a child. The custodian can spend it for the child’s benefit, and must hand over what remains when the custodianship ends. That age varies by state and by how the gift was made: usually 18 or 21, and some states allow up to 25. After that, the young person controls the property with no restrictions, whether or not they are ready to manage it.
  3. A guardian of the estate (called a conservator in some states) is appointed by a court to manage a minor’s property when no custodian or trust is in place. A will can nominate one, but the court makes the appointment. Guardians are typically supervised by the court and may have to file accountings and get permission for major steps, which adds cost and delay. If a child inherits without a trust or custodianship, a court may need to appoint one until the child reaches the age of majority, which is 18 in most states.
  4. A trust offers more control than a custodial account because it can hold money well past age twenty-one. You, as the settlor, write rules into the trust document specifying when and how distributions happen. For example, you might allow one-third at twenty-five, another third at thirty, and the rest at thirty-five. The trustee manages these funds according to your written instructions, providing staged support rather than a lump sum that disappears quickly.
  5. Children with disabilities need special care, because an inheritance received outright may affect means-tested benefits such as Supplemental Security Income (SSI) or Medicaid. A trust funded by parents or others for a disabled child (often called a third-party supplemental or special needs trust) can be drafted so it is not counted as the child’s resource. A different federal rule, 42 U.S.C. §1396p(d)(4)(A), covers trusts holding the disabled person’s own money: the beneficiary must be under 65 and the state is repaid at death.
  6. Naming a guardian for your child’s person (where they live, their schooling, medical care) is done in your will, not in a trust; the court makes the final appointment and usually gives weight to your choice. A trust deals only with money and property. A will alone does not manage money for a minor, so families often pair a will naming a guardian with a trust or custodianship for the property. Whoever manages the money owes the child duties: keep records and never mix it with their own funds.

Key facts

  • In the US, minors can own property but generally lack legal capacity to manage it, so an adult custodian, guardian or trustee usually acts for them.
  • A Uniform Transfers to Minors Act custodianship ends at an age set by state law, usually 18 or 21; some states allow up to 25.
  • A guardian of the estate is appointed and typically supervised by a court, often with court accountings; a trustee usually is not supervised by a court day to day.
  • In the US, a trust funded by parents or others for a disabled child can be drafted to protect means-tested benefits; 42 U.S.C. §1396p(d)(4)(A) covers trusts holding the disabled person’s own money.
  • A guardian for a child’s person is nominated in a will, not in a trust or custodial account; the court makes the final appointment.
  • A trust for a minor can hold property past age 21 and release it in stages at ages the settlor chooses.

Exercise nine, six, three, one

9CollectList up to 9 assets you might one day leave to a child, your own or one you care about (most people have fewer), such as a bank account, a life insurance policy or a family item, and note whose name each is in now.
6ClusterSort the 9 assets into 6 categories based on how easily they can be transferred: cash, securities, real estate, business interests, personal property, and insurance proceeds.
3DistillReduce the 6 categories to 3 groups: assets a custodian could easily hold, assets that might need a trustee or court-appointed guardian, and assets you are unsure about.
1CrystallizeWrite 1 sentence naming which of your 3 groups would need an adult (custodian, trustee or guardian) to manage it for a child, and one question you would want answered about it.

Fact check

Dates, figures and claims checked against the published sources listed below.

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