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Sunday, July 25, 2010

Can a minor inherit money or property?


The general answer is "no". A person must be of the age of majority (either 18 or 19, depending on where in Canada you live) to receive an inheritance.


So what happens to the money or property if it's left to someone who is a minor? It's held in trust for the minor until he or she reaches the age of majority.


This is a situation in which the existence of a strong Will is essential. The Will can control at what age the child inherits the money, who holds it for them in the meantime, and whether any of it can be used for the child before he or she comes of age. Most parents I've spoken to over the years say they'd like to put some controls on the inheritance for children to make sure that the children aren't taken advantage of by anyone, and to help the child maximize the benefit of the inheritance. They can achieve that using their Wills.


If there is no Will in place and a minor is a beneficiary of the person's estate, the money will most likely be held for the child by the Office of the Public Trustee. The full amount of the inheritance (plus interest of course) will be paid to the child on his or her 18th (or 19th) birthday.


In a Will, the terms of the trust are decided by the testator, allowing parents to choose an age later than 18 or 19 if that seems appropriate, and to choose who will look after the money. The parent can also direct that funds from the trust be used to pay for education, medical expenses or general living expenses.


Personal or household items that are left to a child are usually held by the executor/trustee of the Will. Depending on the item, the trustee might decide that the child can have or use the item before reaching the age of majority, if that would be of benefit to the child. For example, you might not want to give valuable jewelry to a 10-year-old, but you might be ok with putting up the framed photos the child inherited.


A minor's name cannot be added to the title of real estate. Again, that has to be held in trust either by the executor/trustee or another person specifically named in the Will.

41 comments:

  1. If you only have a small amount of money, like $30,000, how can you leave it to your children to inherit upon age of consent without being spent by your estranged spouse? What would be the most cost effective yet safe way to do that?

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    1. This really depends on what kind of asset you are talking about. I'm assuming that you are going to make a will, which is great. Name an executor who is not your ex, and whom you can trust to follow the will and carry out your wishes.

      If you have any assets that are going to pass to your kids through your estate (money, car, insurance) consider putting in a clause that specifically prohibits your ex from acting as trustee of your kids' inheritance.

      When money is left in trust, you can choose whether your kids (or an adult taking care of them) would have access to the money before the kids come of age. This is called encroachment. You could say in your will that there is to be no encroachment. That would make sure that nobody could access the funds before the kids come of age, but of course it also means the money is not available if the kids need something like braces or college money.

      If the money is in cash, have you thought about setting up separate "ITF" bank accounts? ITF means In Trust For. These are not real trusts, but are accounts which you set up now at the bank with your kids' names on them. If you have passed away, as each child turns the age of majority, he or she would receive the funds. This might not be workable if you actually need the money yourself.

      Lynne

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  2. Thank you for your reply Lynne,

    It would be insurance money from my extended health through work. To be honest, I don't really know anyone I trust enough that I think will survive long enough to see the kids come of age. Could the executor create the ITF account if he is named in the will as the executor? Would a simple notarized will be enough to grant that power to a non-family member if my ex tried to fight and get the money?

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    1. Notarized wills are only used in Quebec. The rest of Canada has a different (common law) legal system. Yes, your executor can set up accounts for the children.

      Lynne

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    2. I want to ensure that my son is taken care of if I pass, by receiving any money from work insurance, my assets, etc., how do I do that if I don't have anyone who I really trust to not spend the money and have his best interests in mind. I don't have alot of money to spend on lawyers and hiring someone, but want to make sure he is taken care of. Can you help advise please?

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    3. If your son is a minor or is disabled, at some point you have to pick someone to handle the money for him. I know that's not always easy. The best you can do is to have documents that build in safeguards. For example, you could appoint two people to be the trustees of his funds so that there are two sets of eyes on everything. You can require your trustees to send an annual report to someone in your family. You might also consider appointing someone who is a professional executor and trustee. This would be either a trust company or (if your estate is more modest) the Public Trustee for your province.

      Lynne

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  3. If a person dies and their will is probated in a province where the age of majority is 19 but the beneficiary lives in a province where the age of majority is 18, which one applies?

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  4. Hi Lynne,

    What happens if my husband passed there was no will. Back in 2005 him and I bought a house. When we applied for the mortgage I had a bankruptcy and wasn't able to go on the mortgage. The agreement of purchase and deposit was in both our names and always made the payments together. Now that my husband has passed the lawyers are saying that seeing that we were common-law (sorry after 14 years I refer to him as my husband) I am not entitled to anything. That the house goes to my son who is 7. They want me to get a mortgage (which I don't make enough to get one) so the money can go in trust for my son. Is this all true? Or can the house just go in trust for my son until he's 18.

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    1. Each province has different rules that apply to inheritance, common law relationships, and the matrimonial home. In some places, common law spouses have absolutely no inheritance rights in the absence of a will. If you live in one of those provinces, then yes it would make sense that the inheritance would by-pass you and go to your husband's child.

      If the house were to be placed in trust for your son, someone still has to pay the mortgage (assuming it was not life insured). When you say they want you to get a mortgage "so the money can go in trust", I think you mean that your son is inheriting money as well as the house and they want to invest the money. However if there is no other way to pay the mortgage, the funds might have to be used for that.

      You mentioned "the lawyers" but you didn't say whether those lawyers work for you or for the bank. They don't particularly sound like lawyers working for you since the solutions they are suggesting don't really work for you. I strongly suggest you consult a lawyer who is not associated with the bank to advise you on your rights. You may be able to claim against the estate for support, depending on your province. And even if that's not possible, you may be given some ideas that work better for you.

      Lynne

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  5. Hi,
    My mom is writing her will and is concerned because of the following: the lawyer said that if she passes on inheritance to me, and then I die before my children reach 18 so that my and my children's inheritance go into a trust, my ex-spouse will therefore have access to the funds because of our shared children. He is very irresponsible with money so the idea that he could get to my daughters' inheritance while it is in trust terrifies her. Is there any way around this? I live in Alberta. Thanks!

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    1. Yes. There are two keys to it.

      One is choosing a trustee who is going to manage the money according to your Mom's wishes and not according to what your ex-spouse wants. My guess is that your Mom has named you as her executor and trustee, which is fine. But she needs to choose an alternate who will handle the money if you have predeceased her. The person she chooses as executor is also the trustee for the kids unless your Mom specifies otherwise.

      The second key is writing a trust for the children that is clear in its instructions. I hope she has a lawyer who has experience in wills because simple boilerplate language is probably not sufficient when there is a specific issue to address. The trust needs to be written so that only the money your Mom wants to be paid out is going to be paid out.

      Keep one important thing in mind. If your Mom's will says that while the grandkids' money is held in trust it can be used for their benefit, then that amount of money is going to go through the ex's hands. That's because he'll be the guardian and the kids will be living with him. If the trust says that money can be spent on the kids' education, or to boost their lifestyle, then most likely those payments will end up going to him. If she doesn't want that, her will needs to say so, loudly and clearly.

      She doesn't need to be terrified. This is do-able.

      Lynne

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  6. Hi Lynne, I have a question. I have two minor children who were left money from my aunt in her will. I have no interest in accessing the money but would like some reassurance that the money has been duly invested on their behalf by the executor. Can you tell me what my rights are in this regard as a parent?

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    1. Although it seems logical to parents that they have some rights in this situation, they really don't. Parents are just not involved in the gift when the children are named directly. The executor is legally appointed as a representative of your children with regard to the trust money and therefore doesn't have to account to you.

      In real life, it usually doesn't come down to rights. There is usually some cooperation simply because the executor will recognize normal parental interest in looking after their kids. But if it comes right down to it, you don't have the legal right to force information from the executor.

      Lynne

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  7. Hi Lynne, I have a question. My aunt left some money to my minor children. The executor gave me a copy of the will. He`s family so I heard that the Estate is holding the money but never got that from him. I have received nothing but the will. Shouldn`t i receive something to show that the money has been invested somewhere and is being held pending some conditions such as age? I certainly don`t want access but this seems somewhat anemic to me.

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  8. Hi Lynne, I am trying to figure ot if it is best to leave my life insurance to my children with a named trustee or to a trusted adult. Is there any advice you have?

    Thank You

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  9. Hi Lynne.
    If a person leaves their estate to three minor children all different ages. Under the terms of the will each child receives a certain share of the estate (not equal shares). Under the terms of the will funds to be held until they each reach 21 years of age.

    My question is . Does this form 3 separate Testamentary Trusts that will have to be filed separably with CRA?

    Thank you

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  10. I inherited money from my deceased mother but it was to be given to me in trust. I am now 27 years old and the executors are claiming they can still hold it until they see it fit to give it to me.

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    Replies
    1. Hi Cee Jay, I responded to your comment in a new blog post dated Dec 23, 2016.
      Lynne

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  11. My daughter was left as beneficiary of her father's life insurance there was no will or executor or trustee. The money will be put in public Trust until 18 is there any help or what other than filing 4 guardianship of her property to receive money to help support her?

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    1. To be honest, there isn't a lot you can do. This is why it's so important to make a will when there is a minor involved. Unfortunately, everyone is bound by what's on paper, which doesn't help much.

      Have you discussed the situation with the Public Trustee? They are usually really good with keeping the best interests of minors in mind. Have you offered to make up a budget showing how much per month your daughter needs, as opposed to asking them to pay the whole policy out to you? I've yet to come across anyone at the Public Trustee who is completely unreasonable.

      Lynne

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  12. My daughter was left large amount of money by my EX mother who just past. They hid her death and now it was brought to my attention by his family that there is money left to my daughter who is 12. I am the primary care giver in court documents. Her dad gets visitation. How do I find out what was left for her and also can my ex take what was left for her?

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    1. The person in charge of the funds for your daughter is the executor of the will. If nobody will tell you who that is, try to find out by going to the courthouse nearest where your ex's mom lived to see whether there is any record of a will or probate for her.

      It's possible that the will named someone in particular to handle the money for your daughter, and it could be your ex. There is no way for me to know since I haven't seen the will. However, if it is the standard will with standard wording, the funds will be in the hands of the executor /trustee. That means that neither you nor your ex can "take" your daughter's money.

      Getting a copy of the will is worthwhile because you will find out more than just who is in charge of the funds. You'll be able to ballpark how much is there for her. You'll also be able to find out things such as whether you can ask for some of the money to help with her care, and whether you can ask for the money to be in your hands instead of the executor. An awful lot depends on the wording of a will, especially when it comes to trusts.

      Best of luck,
      Lynne

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  13. As An Executor, I am instructed to purchase 15 Year , Prescribed, Term Certain Annuities. One of the Beneficiaries is a 16 year old Minor and this is BC. Do I have to hold the distribution until she reaches age of Majority or can I buy a deferred Term Certain An annuity with her Parents signing the application ?

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  14. My husband passed away 15 years ago, my children were 9 and 14 at the time. He left a will that the children were to receive their inheritance when they turned 25. My brother in law is the executor as we were separated at the time of his death. When my daughter turned 25 he offered her an amount with a letter to sign off on, I told her to get a lawyer before she signed anything. Long story short after 4 years with no results with the lawyer. He approached her again with amounts without dealing with lawyers or any paper work and she accepted as she was tired of it all and just wanted some money instead of the possibility of receiving nothing, but she did not sign any release. There is a family cottage that is still remaining that my son wants to buy her half, but he doesn't turn 25 until 2018. My concern right now is for my son. The Executor told him that the money will be available to him on his 25th birthday. He is basically homeless and is waiting for this money and ownership of the cottage for a place to live. Who pays for the capital gains on the cottage?

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    1. The capital gains tax on any estate assets is to be paid from the estate before the beneficiaries receive their shares. If there is not enough cash in the estate to pay for capital gains tax, assets must be sold so that tax can be paid.

      Note that this is the general rule and it stands unless the will specifically says something about tax being paid by a specific fund or a specific person. It is not up to your son and daughter to pay the capital gains tax themselves, but the executor should be paying the tax out of money in the estate, meaning your children will receive less.

      Lynne

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  15. Hi Lynne,

    My grandparents currently have a large chunk of money; that will be passed down to my parents when they pass, and then passed down to me when they pass.. My question is, how does a prenup work when you don’t know the amount you’ll inherit? I’m getting married next year and this whole prenup thing is in the air. What if my kids inherit instead and I become the executor of the trust account? Therefore it’s not really mine and can’t be taken from me in the event of a divorce, but I can still access it if need be?

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    1. Nobody ever knows in advance how much they will inherit, especially two generations ahead of time. That "large chunk of money" could be quite a bit smaller by the time your grandparents and parents are finished using it.

      For your pre-nup you don't need to know an amount. You just refer to any funds that you inherit. Be aware though that if you receive an inheritance and you give some of it to your spouse or you put it into a joint asset that you both use, you might never see that back again. Keep inherited funds separate from marital assets and you'll be in a better position.

      If your children inherit and you are the trustee, you will not have access to the funds for your own use because they won't be yours. Whether or not you can access the funds on behalf of your children will depend on the terms of the trust as set out in the will. Some trusts require you to hold all capital and income until a certain age while other trusts allow you to use some of the funds for the children's benefit while the trust is still in existence.

      If the family decides not to give the inheritance to you and to give it to your children, would you even be chosen to act as their trustee?

      Lynne

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  16. my father died when I was 14 and had left me and my sister equal inheritance. my family wont tell us how much money was left from out father and I believe they are using it to buy things that have nothing to do with what the money was left for. is there any way I can check how much money he inherited before I turn 18 and review what the money has been spent on and if I can and it has been spent what can/do I do

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  17. If a person dies and their will is probated in a province where the age of majority is 19 but the beneficiary lives in a province where the age of majority is 18, which one applies?

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  18. Hi Lynne,

    If a parent passes away and appoints her minor child as the beneficiary of her life insurance and investments (through work) but does not appoint a trustee specifically on the forms, does the other parent automatically become the trustee even if they are divorced? I assumed that the executor of the will would automatically become the trustee but there seems to be differing opinions. Can you please clarify?
    Thanks!

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    1. The executor/trustee automatically becomes the holder of all trust monies for beneficiaries. This is of course unless the will specifically states otherwise, and I'm assuming it doesn't or there wouldn't be a debate going on. The divorced parent is automatically the custodial parent of the child, but this is a completely separate concept from holding the child's money.

      An awful lot of people assume that if they are a parent they get to look after a child's inheritance, but they are wrong.

      Lynne

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  19. Thank you Lynne for this excellent article. I’m just wondering in a situation where both parents pass away leaving behind minor children and wills appointing executors to manage the children’s share of the estate in trust, is there an obligation on the executor to apply to court to be appointed the “Guardian of Property” of the children? Absent being appointed by court as a Guardian of Property for the children, will the executor have the authority to deal with the children’s share of the estate? Thanks!

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    1. No, the executor doesn't have to apply to be appointed the guardian of property. Probate is a court order and it appoints the executor as the trustee of the trust for the children. If someone applies to be the guardian of property for the children, that will cover any other assets that might come the children's way (such as funds from a lawsuit about the parents' death if there was an accident) but that are not covered by the will.

      Of course the executor has the authority to deal with the children's share of the estate. That's the whole point of naming an executor and trustee.

      Lynne

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  20. Hi Lynn, verry informative blog, thank-you.
    I am wondering if a minor has an existing trust with a public trustee, can said child hold property in their own name under said trustee?
    Thank-you, lhr

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    Replies
    1. As a general rule, a minor can't hold property in their own name at all, regardless of whether there is an existing trust. Are you asking whether ALL property going to the minor must be held in the existing trust? If so, the answer is no, not unless there is a direction under a will etc that it be held that way.

      Lynne

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  21. What happens if you die intestate, and the public trustee is looking after the inheritance until the beneficiary reach AOM. Can the guardian access the inheritance to pay for the minors living expenses? How is the inheritance being taxed while it is held by the public trustee?

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    1. Usually when the Public Trustee is holding money for a minor, those funds are not available for use for the simple reason that the PT has no authority to allow that. However, if there is serious need for funds for the child, it is certainly worth entering into a conversation with the PT about that. They may agree to vary the trust based on the needs of the child (which may require an order of the court).

      Usually a trust is taxed each year on any gains. Tax is paid out of the trust itself.

      Lynne

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  22. i wanr to know what happen if i have this house were i live whit my family fully pay and then die and transfer the title to my 13 year old kid can he still be able to live in the house before he 18?

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    Replies
    1. As you will see from reading the article above, you cannot legally transfer real estate to a 13-year-old. However, that doesn't mean it can't be kept for him. You need to make a will, and in the will you set up what is called a residence trust. That means the executor of your will is going to keep the house on behalf of your son until your son is 18. He will be able to keep living in it. This assumes, of course, that you leave behind enough money to pay for expenses for the house, such as mortgage, repairs, insurance, property tax, etc. Also while your child is a minor, you will have to cover expenses such as heat, light, water, phone, internet, etc.

      Go to see a lawyer who does lots of wills, and discuss a residence trust. It's definitely something that can be done.

      Lynne

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  23. My son, a minor, inherited money from my mother. In order to get access to it, there are forms to complete to declare me guardian of property for him. My Mom was a resident of NL and I my son and I are residents of B.C. the forms from NL cannot be used. And I can not locate the equivalent forms in BC. It’s become such a huge mess. I feel completely lost.

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