Your Minor Child Inherited Some Money. Now What?

kids-and-money

What happens when a minor child receives an inheritance?  Can life insurance proceeds just be given to a minor child’s parent for safekeeping, or is court action necessary? What if a minor is a payable on death beneficiary of an account?

I am frequently contacted by parents with questions such as these.  My answer is usually “it depends”.  Typically, it depends on the amount of money the minor child is expected to receive.

If it $5,000.00 or less, then a parent or guardian of the child can typically just receive the payment directly and manage it on behalf of the child.  The details can be found in Minn. Stat. 524.5-104.  Note that the person receiving the money must use it for the care, support, education and health of the minor.

If it is more than $5,000.00, typically a “conservator” must be appointed for the minor.  This involves going to court.  It is usually a routine matter, but it is important that the court rules regarding the petition, notice to interested persons and background checks be followed.  Depending on the county that you are filing your papers in, the process can take as long as 8 weeks.  Many people find it beneficial to have a lawyer involved in the process.  If you do not have a lawyer, you will still be expected to follow all of the rules of court that the lawyers need to follow.

 

Managing Someone Else’s Money Under a POA

POAOne of the ways to avoid having a guardianship imposed is to have an effectively working “lesser restrictive alternative” in place.   A power of attorney is an example of a lesser restrictive alternative.  Although, it is important to note, that the power of attorney does NOT automatically mean that a guardianship will be avoided.  It can be misused or not used at all.  It can be revoked.

If there is a power of attorney in place, it is important that the person acting under the authority given by it, follow some basic rules/guidelines.  The  Consumer Financial Protection Bureau has released a guide called “Managing Someone Else’s Money: Help For Agents Under a Power of Attorney”.  It is a great resource.  It sets forth, in very basic, understandable language, what a power of attorney is, what a person’s duties are under the power of attorney, how to recognize financial exploitation, and contact information for varioius agencies that deal with exploitation.

The 4 basic duties of an agent acting under a power of attorney for a principal (the person granting the power):

  1. Act only in the Principal’s best interest.
  2. Manage the Principal’s money carefully
  3. Keep the Principal’s money and property separate from your own
  4. Keep good records

Check out this great resource for more details!