HE LOOKS SO CUTE IN HIS SUIT AND TIE!
MISTAKE # 29
Not thinking through the ramifications of giving property to minor children
A LOT OF PARENTS MISTAKENLY THINK that all sorts of neat and innovative estate planning can be done by having their young children hold assets or money in their own names. Whether it is a misguided attempt to save tax or a cute way to encourage early investment acumen, more often than you might think, parents put shares in their small business or bank accounts into their kids’ names (or “in trust,” whatever the heck that means) only to regret it later.
If, like us, you read tabloid magazines while standing in the grocery checkout line, you’ll notice that child actors and teen pop idols fight a lot with their parents. It’s just a wild guess but we’re pretty sure that some of the drama revolves around money. Even young people who are rich and famous can’t control money if they haven’t reached the age of majority—and neither necessarily can their parents, although parents from the beginning of time have assumed that what belongs to their kids belongs to them.
And as we say, even the not-so-rich-and-famous crowd can get caught up in thinking that assets in their kids’ own names sound like a great idea. Perhaps parents think that ultimately they themselves will be able to direct the transfer of the assets out of the names of the children but that’s not how it works. If your minor children hold shares in your private company and you decide it is time to do a complicated reorganization, good luck with that. One estate lawyer we spoke with said she had seen situations like this involving thousands of dollars in professional fees. If the children are under the age of majority, the appointment of a guardian or trustee (the wording will depend on your province of residence) is required and then the appointed guardian or trustee needs to be at the table ensuring that the reorganization makes sense for the minor child.
The other situation that can strike fear in a parent’s heart is when a child is nearing the age of majority and the parent realizes that he or she will soon be able to claim the bank account that has been building up at a nice clip over the years. Somehow when our kids are babies we just can’t imagine the faraway day when they will be adults. Then that birthday when our child becomes legally an adult is right there in our face, as is the luxury car dealership.
Restrain yourself when it comes to putting assets into your children’s own name, or get advice on how to do it and what the ramifications will be down the road. As the author Gretchen Rubin puts it about the brevity of our children’s youth: “the days are long but the years are short.”
points to take away
• Minor children cannot manage their own assets, no matter how mature they may seem, and neither can their parents direct, without court approval, the transfer of assets that have been placed in the names of the children.
• Get professional advice about putting assets, such as the shares of your family business, into your children’s names; if you put assests in their names without clearly thinking it through, the future result may be an expenditure of significant time and money.
