Making a gift to a minor may be difficult for a number of reasons. The minor may not be legally able to manage the property that you leave for them. In addition, they may not be responsible enough to manage the asset for their long term benefit.
For some, making gifts to their minor children may be a technique to reduce the size of their estate for estate tax purposes. Whatever the reason may be, there are a couple of options for making a gift to a minor that may be suitable depending on your specific situation.
Some people decide to use a trust as the primary vehicle for holding and managing property for a minor. The trust has the benefit of having a Trustee who can manage the trust asset and who may be granted the discretion to make distributions to or for the benefit of a minor child. This trust could be established for your child either while you're alive, or it can be set up at the time of your death.
One downside to using a trust, however, is that the cost of maintaining a separate trust for a minor child may be excessive in relation to the value of the assets held in the trust.
California Uniform Transfers to Minors Act
Where the gift to minor person is relatively small, using a custodial account under the California Uniform Transfers to Minors Act (CUTMA) may be more attractive. Generally, the gift is held by the Custodian you select until the minor child reaches a specified age.
Figuring out the best way to transfer your assets to minor beneficiaries can be challenging. Most people grapple with the desire to provide for the child but not grant unfettered access in a way that would cause the minor to lose motivation in pursuing his or her own life goals. Estate planning lawyers can provide helpful insights on how to structure such a gift.