Can a minor (a child who is less than 18 years old) inherit money or property?

Yes, but not directly. At least until the minor becomes an adult (when they turn 18), someone else must manage the money or property for them.

Can someone designate a minor as a beneficiary of a 401k or life insurance policy?

Yes, a minor can be a beneficiary of a 401k or life insurance policy. However, until the minor turns 18, someone else must be in charge of managing the account or the policy for them and for ensuring they receive any needed benefits.

NOTE: Under federal law (ERISA, 29 U.S.C. 1001 et seq.), a person’s spouse is the beneficiary of their 401k unless their spouse signs a special written waiver permitting them to designate somebody else.

Who manages a minor’s inherited money or property?

Depending on how the money or property is left to the minor, the person who manages it is called one of the following:

• Conservator,
• Custodian, or
• Trustee

When is the manager of a minor’s inherited money or property called a conservator?

As a general rule, the manager of a minor’s inherited money or property is called a “conservator” when they are appointed to serve in that role by the court. This happens most often in two situations:

• When someone dies and leaves a 401k, life insurance policy, or last will and testament that designates the minor as a beneficiary of certain money or property, but does not name a specific person to manage it for them
• When someone dies without a will (“intestate”), and the law says that, due to their familial relationship to the person who died, the minor is their heir and therefore needs someone to manage the money or property for them

As a general rule, a conservator manages a minor’s inherited money or property until the minor turns 18. Only when the minor becomes an adult can they manage the money or property for themselves.

When is the manager of a minor’s inherited money or property called a custodian?

As a general rule, the manager of a minor’s inherited money or property is called a “custodian” when someone dies and leaves a gift to the minor under the Arizona Uniform Transfers to Minors Act (A.R.S. § 14-7651 et seq.).

As a general rule, a custodian manages a minor’s inherited money or property until the minor turns 21. Only when the minor turns 21 can they manage the money or property for themselves.

When is the manager of a minor’s inherited money or property called a trustee?

As a general rule, the manager of a minor’s inherited money or property is called a “trustee” in one of two situations:

• When someone who is still living makes a gift to the minor in the form of a “living trust”
• When someone dies and leaves a gift to the minor in the form of a “testamentary trust” in their will

As a general rule, a trustee manages a minor’s inherited money or property however the gift-giver (the “trustor”) wanted. For example, if the trustor wanted the minor to be the beneficiary of the trust until the minor turns 25 and for the trustee to manage the minor’s inherited money or property for the “health, education, maintenance, and support” of the minor until that time, then that is what the trustee will do. In this example, only when the minor turns 25 can they manage the money or property for themselves.

For legal advice about leaving money or property (including a 401k or life insurance policy) to a minor, please consult with an attorney.

Resources

Legal Aid Resources in Arizona - https://azcourthelp.org/home/legal-aid-resources

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