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I have read a lot of the books on estate planning, and most of them seem to
gloss over the specifics of what happens regarding property left to minors
when it is time for a trustee to transfer this property to them as
beneficiaries.
This has to do with a basic shared living trust, where all property was
shared between husband and wife as community property before it was
transferred into the trust. Assets are basically a house (primary
residence), money market account, brokerage account, life insurance,
retirement plan and personal property in the house --- totalling less than
$1 million (i.e. this is not a trust set up for estate tax savings --- it is
set up for probate avoidance). For the purpose of this discussion, say there
are two children. The parents name each other as primary beneficiary for
everything, and then the two children as alternate beneficiaries for
everything in equal shares.
From what I have read, most people use either a "child's trust" (as a
subtrust within the living trust) or name a UTMA custodian as a mechanism to
manage the property for the children until they reach a certain age. This is
about as far as the books go. They do not explain what the trustee of the
trust needs to do in order to transfer the property.
For example, if using "child's trust", does anything need to be done to the
title of the property. Using a bank account as an example. Does it need to
be transferred into into title of the child's trust, e.g. from "The Jack and
Jill Smith Living Trust" into "The Jack and Jill Smith Living Trust, The
Billy Smith Child's Trust" ? And if so, what about that fact that there are
2 children --- do 2 new accounts need to be created from the assets in the
original account, one for each child's trust ? The same question goes for
custodianship --- is the account transferred into title of the custodian as
"Joe Custodian, as custodian for Bill Smith, under the California Uniform
Transfers to Minors Act" --- but given there are two children, should two
new accounts be created, or can the existing account be put into title such
as "Joe Custodian, as custodian for Bill Smith and Susie Smith, under the
California Uniform Transfers to Minors Act" ?
Also, is it the trustee who transfers title to the custodian, or does the
custodian do this ?
Also, there are no examples of this scenario dealing with a house either.
Assuming the children are very young when they become beneficiaries, the
trustee would sell the house. Would the trustee then create two separate
accounts to hold the proceeds from the sale of the house in equal amounts ?
Again, if child's trusts were used, would the new accounts be in title of
the living trust (e.g. "The Jack and Jill Smith Living Trust") or in title
of the two child's subtrusts of the living trust (e.g. "The Jack and Jill
Smith Living Trust, The Billy Smith Child's Trust" ). Would the same answer
apply if UTMA custodians were used, i.e. separate accounts need be created ?
Thank you, and if you can recommend a book where all of this is covered,
please let me know (and do not tell me the Nolo books, because I have read
them and they do not answer these specific questions).
Charlie
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