Children’s Assets
Generally, assets held by your children will not be included as marital property for distributive purpose upon divorce. Essentially, any property held by your offspring will be treated as any other third party asset. Issues arise in cases where parents hold property intended for their minor children without properly giving up control of the asset. Certainly, parental involvement is necessary where a minor’s property is concerned however the assets should be clearly earmarked as belonging to the children rather than remaining in the sole name of the parent.
Custodial accounts, such as those established pursuant to UGMA (Uniformed Gifs to Minors Act) or UTMA (Uniform Transfers to Minors Act), are intended for the benefit of minor children under the supervision of a custodian, usually a parent. Since the account is clearly earmarked for the child’s use and benefit it usually remains intact post divorce. Generally UGMA or UTMA accounts are intended to cover educational expenses but can be invaded for the benefit or support of a minor child. A minor usually obtains full control of the account upon his eighteenth birthday.
Additionally trust accounts can be set up for a child’s benefit. Trusts are created for the benefit of a minor under the supervision of an adult trustee. Trusts may be preferable to UGMA or UTMA accounts since the date when a child gains control of the investment can be set forth in the account documents. In other words, the minor will not automatically gain control of the assets upon his eighteenth birthday as a later date can be set forth. An irrevocable trust generally will no be considered marital property for distribution purposes. A revocable trust, however, can be terminated and liquidated for the benefit of the spouses and can, therefor, be considered for equitable distribution. If a spouse has an equitable interest in the trust, the conveyance was invalid or the asset was dissipated by one partner in anticipation of divorce the asset will be included as marital property to be distributed.
Regardless of the type of account established, it is imperative to name people who you trust implicitly to replace you as trustee or custodian in the event of an unfortunate circumstance. A co trustee or custodian can also be appointed. The individual appointed will supervise your children’s accounts in the event you are no longer able to fulfill your duties. In such circumstances it is more important that you trust the financial capabilities of the person appointed than his emotional attachment to your children.