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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.

9 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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  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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