My wife is executrix of an estate and we're down to the last steps. She wants to take the money that's left (~$45K) and create 529 accts for the two beneficiaries, both pre-teen grandchildren. Can the estate own those accts or does she need to set up trusts for them with her as the trustee? If trusts, which type of trust and is it one trust for both accts or a different trust for each? She has a tax ID# for the estate but has not established any trusts nor opened the
529 accts yet. She'd like to minimize her future time and paperwork and make sure these kids get the most benefit for the least trouble. Thanks in advance for any tips or pointers to more info.
In administering an estate the executor's wants are irrelevant. What does the will say? I'm currently handling a friend's estate, and the will specifies that bequests to minors are to be done under the state's Uniform Transfers to Minors Act provisions. She needs to ask the estate's attorney how to proceed.
By what you're saying it sounds like this is an estate in probate court. So the answer to your question is that it depends on what the will says. If it's not in court but being distributed from a testementary trust, it depends on what the trust says. When an estate goes through probate, generally property left to any beneficiary must be simply given without restrictions. When a beneficiary is a minor, the property should go to the parent to hold for the child. If your wife wants something else, she should go to the probate court and ask the judge for permission to set up whatever she wants. If she's got a good enough reason, the judge may go along, if the law allows it. Otherwise she can't.
The lawyer says the approach is okay, as the will has under "Contingent Trust" what is apparently a fairly standard clause A about having discretion to provide support for "health, support, education, and maintenance" of the beneficiaries preceeding clause B, which has more detailed instructions of how to distribute the remaining assets. At the time that the will was written the assets were much larger, so taking the simple route of getting the biggest bang for the buck via education would seem by far to make the most sense for the kids (and for their parents too, even though legally I suppose that's not a consideration) rather than tying up a relatively small amount of money for them to claim many years from now. And at the same time my wife feels that would be loyal to the spirit of what was intended in terms of helping the kids in the future. If there were say six figures involved it would be a different story, and clause B would come into play more than the standard clause A. So going the 529 route is okay - the only question is how to set up ownership of that since the beneficiaries are still minors. If she let the parents own it, then maybe she'd be delinquent in her duties by in effect turning over assets to someone other than the beneficiaries. It's not a matter of not trusting the parents or anything like that, but she wants to be sure it's set up following the intent of the will as closely as possible to avoid even the remote possibility of getting accused of mishandling it later. Does this explain the situation better?
I haven't noticed if you said which state you are in, so local laws could be different. But here in California you really can't do any of what you are proposing without having it approved by the probate court. In your case your wife would propose to the court what she would like, along with terms under which the parents would be responsible to the kinds for handling their property. If it's consistent with the will, the court will issue an order, probably imposing trusts for the individual kids, naming their parents as trustees and imposing rules for handling the trusts. When probate closes the money will be distributed to the trustees of the various trusts, and your wife will be off the hook. Stu
I learned that I misunderstood our lawyer - He meant all along that we would establish these with the parents as trustees since it's like a gift to their children, so this is simpler than I had realized. I thought my wife would be required to be trustee. So it works out as you described. This is Texas by the way. And thanks much for all the answers here.
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