Texas Estate Planning for Minors: How Children Can Inherit Property
Estate planning is crucial for ensuring that your assets pass smoothly to your loved ones. However, when it comes to minor children, Texas law imposes strict limitations on their ability to inherit property directly. Without proper planning, a child’s inheritance could become entangled in the court system, leading to unnecessary delays, expenses, and complications.
In this guide, we’ll explore why minors cannot inherit property in Texas, why parents or legal conservators cannot automatically inherit on their behalf, and the best estate planning strategies to ensure a child’s inheritance is protected.
Why Minors Cannot Inherit Property in Texas
Under Texas inheritance laws, minors (anyone under 18 years old) lack the legal capacity to own or manage property. If a minor inherits real estate, financial accounts, or other assets, they cannot legally sell, manage, or make decisions about that property until they reach adulthood.
Because of this restriction, courts require a fiduciary—someone with a legal duty to act in the child's best interest—to manage the inheritance on the child’s behalf. Without proper estate planning, this process can be time-consuming and expensive.
Why Parents or Legal Conservators Cannot Inherit on a Child’s Behalf
Some assume that a surviving parent or legal conservator can automatically take ownership of a child’s inheritance to manage it for them. However, Texas estate law does not permit this unless specific legal arrangements are in place. Without a formal trust or guardianship, a parent or conservator has no legal authority to access or manage an inheritance left directly to a minor, often resulting in court intervention.
Best Estate Planning Options for a Child’s Inheritance
To avoid probate complications and ensure a child’s inheritance is protected, parents and guardians should consider the following Texas estate planning strategies:
1. Revocable Living Trust for Minors
A revocable living trust allows you to transfer property into a trust during your lifetime and designate a trustee to manage it for the benefit of your child. The trust terms can specify:
When and how the child receives their inheritance (e.g., lump sum at 25, staggered payments, education expenses).
Who manages the assets (a trusted family member, professional trustee, etc.).
How funds can be used for the child's care.
A revocable trust provides the most flexibility and control over a child’s inheritance while also benefiting the parent during their lifetime.
2. Contingent Trust in a Will
If you prefer not to create a trust during your lifetime, you can include a contingent trust in your will. This provision states that if a minor inherits property, the assets will be placed in a trust managed by a designated trustee until the child reaches a specified age.
Unlike a revocable trust, a contingent trust only takes effect upon your passing and is irrevocable. The benefit of both a revocable and contingent trust is that funds can be used during the minor’s childhood to cover education, healthcare, and other essential expenses.
3. Custodial Account (UTMA Account)
The Uniform Transfers to Minors Act (UTMA) allows parents or guardians to establish a custodial account for a minor. The appointed custodian manages the funds until the child reaches age 21 in Texas. A provision allowing for the creation of a custodial account can be placed in your Last Will and Testament, or may be created by you during your lifetime.
While not as flexible as a trust, a UTMA account is a simple and cost-effective way to transfer financial assets to a minor without court involvement.
What Happens If a Child Inherits Property Without Planning?
If a minor inherits property without a trust or other planning in place, Texas law requires court intervention. The following options may be necessary:
1. Court Registry
If the inheritance consists of cash, the courts may require funds to be deposited into the court registry until the child turns 18. The child cannot access or use these funds before adulthood, limiting financial flexibility.
2. Guardian of the Estate
For larger inheritances, a court may appoint a guardian of the estate to manage the child's property. However, this requires ongoing court supervision and can be costly and burdensome.
3. 1301 Management Trust
A 1301 management trust is a court-supervised trust managed by a trustee (such as a financial institution or family member) for the minor’s benefit. This structured approach allows funds to be used for the child’s needs while maintaining court oversight.
Conclusion: Protect Your Child’s Inheritance with Proper Estate Planning
Failing to plan for a child’s inheritance can lead to court delays, legal fees, and unnecessary complications. By using estate planning tools such as trusts or custodial accounts, parents and guardians can ensure that a child’s inheritance is protected and managed according to their wishes.
If you have minor children and want to secure their financial future, contact an experienced Texas estate planning attorney to discuss the best strategies for your family. Proper planning today provides peace of mind and protects your child’s inheritance for years to come.
