Leaving an Inheritance to a Minor Child in New York: Guardians, Trusts, and the ,000 Rule

By Albert Goodwin, Esq., New York estate planning and probate attorney. About the author.

A child under 18 cannot receive an inheritance of more than $10,000 outright in New York. If your will leaves money or property to a minor and says nothing else, the Surrogate's Court must appoint a guardian of the property to hold the inheritance until the child turns 18, and that guardian will need court permission to spend it. Most parents avoid that result by directing a minor's share into a trust under the will, naming a guardian of the property as a backup, or using a custodial account under New York's Uniform Transfers to Minors Act. This guide covers each option, the statutes behind them, and how to handle a child born after your will was signed.

The $10,000 rule: why a minor cannot inherit outright

New York treats a person under 18 as a minor without legal capacity to manage property. A parent is the natural guardian of a child's person, but a parent has no automatic authority over a child's property. To receive and manage a minor's inheritance, a parent, like anyone else, must be appointed guardian of the property by the Surrogate's Court under Article 17 of the Surrogate's Court Procedure Act (SCPA).

Small sums are the exception. Under SCPA § 1708, when the property due to a minor does not exceed $10,000, the court may dispense with a guardianship and direct payment to a parent or to the person the child lives with, or order the funds deposited in a bank account that cannot be withdrawn without a court order. Above $10,000, a full guardianship is the default. The figure refers to the value of the property the child is receiving in that proceeding; it is not a running lifetime total of everything the child has ever been given.

The rule reaches every source, not just wills. Life insurance payable to a minor, a retirement account that names a minor, a personal injury settlement, and an intestate share all trigger the same requirement. An executor who is holding funds for a minor with no guardian in place can deposit them with the court under SCPA § 2220 (in New York City, with the Commissioner of Finance). The money then sits, earning modest interest, until a guardian is appointed or the child turns 18.

What a guardian of the property can and cannot do

A guardianship of the property is a court-supervised arrangement. The guardian takes an oath, may have to post a bond, and receives letters of guardianship that usually restrict what the guardian can do without a further order. In most cases the funds are placed in an account subject to joint control with the court, so the guardian cannot withdraw principal without asking the judge. The guardian must file annual accountings. Investments are limited to conservative choices. Each request to spend money on the child, for private school tuition, a laptop, orthodontics, requires a petition and an order.

Courts also expect a living parent to keep supporting the child from the parent's own resources. Judges are reluctant to let a guardian draw down an inheritance for food, housing, and ordinary expenses that a parent is obligated to cover.

The guardianship ends when the child turns 18. At that point the remaining property is paid to the child outright, with no strings. For a large inheritance, that is the main weakness of relying on a guardianship alone.

Naming a guardian in your will: SCPA § 1710

SCPA § 1710 allows a parent to appoint, by will, a guardian of the person, a guardian of the property, or both, for a minor child. The appointment is a nomination. It does not transfer authority on its own. After the will is admitted to probate, the nominee petitions for letters of guardianship, and the court confirms the appointment if it finds the nominee suitable and the appointment in the child's best interests. In practice, a parent's choice carries heavy weight and is rarely set aside without a disqualifying reason, such as a criminal record, a conflict of interest, or evidence of unfitness.

Two limits apply. First, a surviving parent who is fit normally keeps custody of the child, so a nomination of a guardian of the person matters most when both parents are gone or the other parent cannot serve. Second, if you want the child's inheritance managed by someone other than the surviving parent, for example after a divorce, do not rely on a guardianship nomination. Leave the child's share to a trust under the will and name the trustee you want. A trust gives you control over who manages the money regardless of who has custody.

Always name a successor. If your first choice dies, moves abroad, or declines, the successor steps in without a new round of litigation over who should serve.

Guardian of the person versus guardian of the property

New York separates the two roles. The guardian of the person decides where the child lives, where the child goes to school, and what medical care the child receives. The guardian of the property manages the child's money, files the accountings, and makes investment decisions. The same person can hold both roles, or you can split them. Many parents name the relative closest to the child as guardian of the person and a sibling or friend with financial experience as guardian of the property. Splitting the roles creates a check between caregiving and money management, and it lets each person do what they are good at.

Four ways to leave property to a minor, compared

Option 1: a testamentary trust under the will

A testamentary trust is created inside the will and comes into existence when the will is admitted to probate. The will leaves the minor's share to a named trustee, who invests the assets, pays for the child's needs under standards you set, and distributes the principal at the age or ages you choose. Common structures include outright distribution at 25, distribution in thirds at 25, 30 and 35, or a single pot trust for all of your children that is divided only after the youngest finishes college.

The trustee has the powers listed in the will plus the default fiduciary powers in EPTL § 11-1.1. The trustee can pay tuition, cover medical bills, fund a down payment, or support a child during graduate school without filing a petition for each disbursement. Investments are governed by the prudent investor rule in EPTL § 11-2.3 rather than the tighter limits that apply to a court-appointed guardian. Because the trust is funded through probate, it does nothing for assets that pass by beneficiary designation unless those designations name the trust.

For a fuller discussion of the pros and cons, see our page on the advantages and disadvantages of a testamentary trust. If you already have a revocable living trust, you can accomplish the same thing by adding a minor's subtrust to that document; see what assets can and cannot go into a revocable trust.

Option 2: a UTMA custodial account

New York's version of the Uniform Transfers to Minors Act is in EPTL Article 7, Part 6 (EPTL § 7-6.1 and following). A will can direct that any property passing to a minor be delivered to a named custodian under the Act (EPTL § 7-6.5). The custodian holds the property for the child, may spend it for the child's benefit, and is not supervised by the court. A custodianship created by will ends when the child reaches 21 (EPTL § 7-6.20), and the custodian must then turn the property over to the child.

If the will does not authorize a UTMA transfer, an executor can still make one under EPTL § 7-6.6, but needs court approval if the value exceeds $10,000, and the custodianship created that way ends at 18 rather than 21. The lesson is to put the authorization in the will if you want the custodian route available.

UTMA works well for a few thousand dollars or a modest brokerage account. It is a poor fit for a house, a business interest, or a six-figure inheritance, because 21 is still young and the custodian has no discretion to hold the property longer.

Option 3: a supplemental needs trust for a child with a disability

If your child receives Supplemental Security Income, Medicaid, or another means-tested benefit, or has a condition that may require those benefits later, an outright inheritance counts as a resource and can disqualify the child. The fix is a supplemental needs trust (often called a special needs trust) that meets the requirements of EPTL § 7-1.12. A trust that meets that statute is not counted as the child's resource, and the trustee can pay for things the benefits do not cover: therapy, equipment, travel, recreation, a phone, a better wheelchair.

A third-party supplemental needs trust is funded with someone else's money, including a parent's bequest. It has no Medicaid payback requirement, and whatever is left at the child's death passes to the people you choose. A first-party trust, funded with the child's own assets such as a personal injury settlement, must pay back Medicaid at the child's death under 42 U.S.C. § 1396p(d)(4)(A). For a parent's estate plan, the third-party trust is the right vehicle.

As a general rule, a parent should not leave assets outright to a child who depends on means-tested benefits. There are limited situations where an outright gift is harmless, such as a small bequest that stays under the resource limit, or a child whose benefits are not means-tested. Those are the exceptions. An outright bequest that lands in the wrong hands can only be repaired after the fact with a first-party trust and its payback obligation, so the planning should be done up front. Read more on our page about the benefits of a special needs trust.

Option 4: guardianship alone

Sometimes a guardianship is the right answer. A $15,000 bequest to a 16-year-old does not justify the drafting and administration of a trust. The guardianship will last two years and the child will take the balance at 18. In that situation, naming the guardian in the will so that the appointment can be made in the probate proceeding, rather than in a separate petition, is enough.

Sample will language

The clauses below show how the pieces fit together. They are illustrative only. A will must be executed with the formalities of EPTL § 3-2.1 (signed at the end in the presence of two witnesses, with the testator declaring the document to be a will), and the full trust article would be considerably longer.

ARTICLE __. Beneficiaries Under Age Twenty-Five. If any share of my estate becomes distributable to a person who has not reached the age of twenty-five (25), I direct my Executor to pay that share to my Trustee, to be held in a separate trust for that person under Article __. My Trustee may apply so much of the income and principal as my Trustee considers advisable for the beneficiary's health, education, maintenance and support, and shall distribute the remaining principal to the beneficiary upon reaching the age of twenty-five (25).

ARTICLE __. Guardians. If my spouse does not survive me, I appoint my sister, [NAME], as Guardian of the Person of each child of mine who is a minor at my death. I appoint [NAME] as Guardian of the Property of each such child with respect to any property that does not pass under Article __. If either of them fails to qualify or ceases to act, I appoint [NAME] in that person's place.

ARTICLE __. Children. References in this Will to "my children" mean [NAME] and [NAME] and any child born to or adopted by me after the date of this Will.

The first clause sends the money to a trust rather than a guardianship. The second names guardians, with a successor, for anything that slips outside the trust. The third protects you against the after-born child problem described next.

Adding a child born after the will: EPTL § 5-3.2

Many parents searching this topic actually want to know what happens when a child is born after the will was signed. New York answers that question in EPTL § 5-3.2. The statute applies to a child born or adopted after the will's execution who is neither provided for nor mentioned in the will and who has not been provided for by some other settlement. If those conditions are met:

• You had no children when you signed the will: the after-born child takes the share they would have received if you had died without a will, which comes off the top of the estate before the other gifts are paid.
• You had children when you signed and left them nothing: the after-born child also takes nothing.
• You had children when you signed and provided for them: the after-born child shares in what was left to the other children, as if the gift to children had included the new child. The other children's shares shrink to make room, and the rest of the will is unaffected.

The statute is a safety net, not a plan. It can produce a share that is far smaller or far larger than what you intended, and it does nothing for a child who was already alive when you signed and was simply left out. New York has no general pretermitted heir statute for living children; an omission of a living child is honored whether it was deliberate or an oversight.

The clean solution is to update the will. You can sign a short codicil that adds the new child, or sign a new will that replaces the old one. Either document must be executed with the same formalities as a will under EPTL § 3-2.1. Handwritten changes on the original will do not work and can create a contest. Better still, draft the original will so that it defines "my children" to include later-born and adopted children, and leaves the minor's share to a trust that automatically divides among all children living at your death. With that language in place, the birth of a child does not require any amendment at all.

A will for a family with young children should be revisited after each birth or adoption, after a divorce (which revokes gifts to a former spouse under EPTL § 5-1.4 but does not touch gifts to children), and when a child's health or circumstances change. See our page on wills for parents in New York City for the broader checklist.

Beneficiary designations override the will

Your will does not control a life insurance policy, an IRA, a 401(k), or a transfer-on-death account. Those pass to whoever is named on the designation form. If you name a minor child directly, the insurer or custodian will not pay the child and will not pay you a parent either; it will hold the money until a guardian of the property is appointed. The same trust you set up in the will can be named as the contingent beneficiary of those accounts so that every asset ends up in one place under one trustee. We review designation forms alongside the will for exactly this reason. For what happens when an account has no designation at all, see bank accounts with no beneficiary at death in New York.

Frequently asked questions

What happens if no guardian is named in the will?

Someone has to petition the Surrogate's Court for letters of guardianship of the property, usually the surviving parent or a close relative. The court decides who is suitable. Until a guardian is appointed, the executor can hold the funds in the estate or deposit them with the court under SCPA § 2220. The process adds months and legal fees, which is why naming the guardian in the will matters even when a trust is the primary plan.

Can a parent be the guardian of the property?

Yes, and a surviving parent is usually the first choice. The parent must still be appointed by the court and is subject to the same bond, joint-control, and accounting requirements as any other guardian. Being the child's parent does not by itself give the parent access to the money.

Does a stepchild count as my child?

Not unless you have legally adopted the stepchild. The words "children" and "issue" in a New York will reach biological and adopted children, and nonmarital children who meet the requirements of EPTL § 4-1.2, but not stepchildren or foster children. If you want a stepchild to inherit, name that child specifically.

My child is 17. Can I just leave the money to them directly?

A 17-year-old is a minor. Anything over $10,000 will require a guardian of the property for the months until the child turns 18, and then the balance is paid outright. If the amount is modest, a short guardianship is tolerable. If it is substantial, a trust that holds the money past 18 is usually the better choice.

Can the guardian spend the inheritance on the child's ordinary expenses?

Only with a court order, and judges generally expect a living parent to cover ordinary support from the parent's own funds. Expenses that go beyond ordinary support, such as private tuition, a special program, or medical costs not covered by insurance, are the usual subjects of a withdrawal petition.

Does the $10,000 limit apply to real property?

Yes. A minor who inherits a share of a house cannot sign a deed, a mortgage, or a contract of sale. A guardian of the property is needed to deal with the real estate, and a sale requires court approval. Leaving real estate to a trust rather than to the minor avoids that problem.

Related reading

• Drafting a will in New York City
• Wills for parents of minor children
• Advantages and disadvantages of a testamentary trust
• Benefits of a special needs trust
• Benefits of a living trust
• A sample New York City probate timeline

Talk to a New York estate planning attorney

Leaving an inheritance to a child takes more than writing the child's name in the will. The right structure, whether a guardianship, a UTMA account, a testamentary trust, or a supplemental needs trust, depends on the size of the inheritance, the child's age and health, who will be raising the child, and how much control you want to keep over the timing. We draft wills and trusts for parents, nominate and petition for guardians, and review beneficiary designations so that every asset lands where you intend. The Law Offices of Albert Goodwin is located in Midtown Manhattan, New York, NY. Call 212-233-1233 or email [email protected] to schedule a consultation.