Minor's structured settlement check - utma/ugma/trust

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TheCowbell
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Minor's structured settlement check - utma/ugma/trust

Post by TheCowbell » Thu Feb 13, 2020 5:30 pm

My DD is 13 and received a small-5-digit settlement check as the first of several larger payouts that will arrive over the years.

I was given some advice to put this money into a trust, however after a lengthy conversation with a Vanguard rep it seems I'll need to involve lawyers and possibly an estate planner if this is the route I wanted to take.

I'm not sure a trust is the right answer here - this is her money, isn't a trust a more appropriate vehicle for monies gifted to someone where you want to ensure you still have some measure of control? I suppose I view this check as something that should be completely in her control once she is 18.

To that end, the rep said a utma/ugma might be more appropriate as that is structured in a way that would make her an irrevocable owner. He also warned that if I went that route, and decided to move the monies into a trust I could face a legal challenge from DD as a utma/ugma is an irrevocable gift. But then, it's not a gift at all is it - these settlement checks are her property!

Hoping for some advice from anyone that has more insight into this kind of situation than me. Which is likely anyone else on this forum.

Thanks in advance.

123
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Re: Minor's structured settlement check - utma/ugma/trust

Post by 123 » Thu Feb 13, 2020 5:38 pm

For a minor often any periodic legal settlement is often intended for current support needs including food, clothing, housing, education, and medical expenses/insurance. Sometimes it can be helpful to think of using such payments for those purposes and using other money (perhaps that of you or your spouse's earnings) to contribute to savings accounts (which may not necessarily be restricted to the future use for the individual child). This is not "stealing" the child's money, it may be essential to comply with any court decision pertaining to the settlement.

If the structured settlement involved approval by a court carefully read the purpose and terms of the court decision settlement and adhere to them.
Last edited by 123 on Thu Feb 13, 2020 5:46 pm, edited 3 times in total.
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bayview
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Re: Minor's structured settlement check - utma/ugma/trust

Post by bayview » Thu Feb 13, 2020 5:39 pm

Does she know about these payments?
Do you discuss finances in general with her?
Does she need these payments due to ongoing healthcare needs, possible/probable reduced future income, housing/transportation modifications needed, etc.?
Do you have any kind of feel for how common-sense she will be? (not impulsive, not dramatic, etc.)

It’s a lot to expect of many 18-year-olds to know how to responsibly handle a large chunk of change. At a minimum, being somehow able not to let friends and acquaintances know.

I think that as a parent, you have a great deal of responsibility in helping her gain the insight needed for this situation.
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Topic Author
TheCowbell
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Re: Minor's structured settlement check - utma/ugma/trust

Post by TheCowbell » Thu Feb 13, 2020 5:50 pm

She knows of the payments but not amounts. I think she's too young to really go in depth about amounts but will likely do so when she is 15 or 16. The structured settlement payments will total around 30k by the time she's 18. Another 100k arrives at 22.

She doesn't need anything, the injury was purely aesthetic and she hides the scar with her hair style and truth be told she isn't really bothered by it. She's a very pragmatic kid, not too concerned with appearances. Very level head, don't think she'll blow her funds on anything at 18 or 22 but who really knows?

I just want to make sure I'm not shooting myself in the foot by putting these checks into the wrong vehicle, and I also hope I'm not overthinking things. Maybe the answer is a simple utma, throw it in vigix and forget about it?
Last edited by TheCowbell on Thu Feb 13, 2020 6:37 pm, edited 1 time in total.

emilyinsf
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Re: Minor's structured settlement check - utma/ugma/trust

Post by emilyinsf » Thu Feb 13, 2020 5:52 pm

What state is this in?

Dottie57
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Re: Minor's structured settlement check - utma/ugma/trust

Post by Dottie57 » Thu Feb 13, 2020 6:32 pm

bayview wrote:
Thu Feb 13, 2020 5:39 pm
Does she know about these payments?
Do you discuss finances in general with her?
Does she need these payments due to ongoing healthcare needs, possible/probable reduced future income, housing/transportation modifications needed, etc.?
Do you have any kind of feel for how common-sense she will be? (not impulsive, not dramatic, etc.)

It’s a lot to expect of many 18-year-olds to know how to responsibly handle a large chunk of change. At a minimum, being somehow able not to let friends and acquaintances know.

I think that as a parent, you have a great deal of responsibility in helping her gain the insight needed for this situation.
+1

Many young people would blow the money on clothes , cars and other consumables. Start preparing her to use the money for education and furthering her abilities as an adult.

Topic Author
TheCowbell
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Re: Minor's structured settlement check - utma/ugma/trust

Post by TheCowbell » Thu Feb 13, 2020 6:35 pm

emilyinsf wrote:
Thu Feb 13, 2020 5:52 pm
What state is this in?
NY

Topic Author
TheCowbell
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Re: Minor's structured settlement check - utma/ugma/trust

Post by TheCowbell » Thu Feb 13, 2020 6:39 pm

Dottie57 wrote:
Thu Feb 13, 2020 6:32 pm
bayview wrote:
Thu Feb 13, 2020 5:39 pm
Does she know about these payments?
Do you discuss finances in general with her?
Does she need these payments due to ongoing healthcare needs, possible/probable reduced future income, housing/transportation modifications needed, etc.?
Do you have any kind of feel for how common-sense she will be? (not impulsive, not dramatic, etc.)

It’s a lot to expect of many 18-year-olds to know how to responsibly handle a large chunk of change. At a minimum, being somehow able not to let friends and acquaintances know.

I think that as a parent, you have a great deal of responsibility in helping her gain the insight needed for this situation.
+1

Many young people would blow the money on clothes , cars and other consumables. Start preparing her to use the money for education and furthering her abilities as an adult.
She's not wired that way. My other DDs are... I think I have very little to worry about with this one but the devil's in the details. How will these funds affect financial aid, etc.

emilyinsf
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Re: Minor's structured settlement check - utma/ugma/trust

Post by emilyinsf » Thu Feb 13, 2020 6:43 pm

TheCowbell wrote:
Thu Feb 13, 2020 6:35 pm
emilyinsf wrote:
Thu Feb 13, 2020 5:52 pm
What state is this in?
NY
Ok, then I don’t have advice. You might want to discuss with the attorney who represented your daughter.

Grt2bOutdoors
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Re: Minor's structured settlement check - utma/ugma/trust

Post by Grt2bOutdoors » Thu Feb 13, 2020 6:59 pm

TheCowbell wrote:
Thu Feb 13, 2020 6:35 pm
emilyinsf wrote:
Thu Feb 13, 2020 5:52 pm
What state is this in?
NY
The kid doesn’t get title moved into her name until age 21, that is the rule for New York State. Monies in a trust or UTMA will need to be disclosed on FAFSA or CSS profile. They will consider those funds as available for education unless the aid is in form of a grant or merit scholarship. However, if your child has a part time job in the future, you can move some of the money up to total amount of gross earnings and IRS limits at the time into a Roth IRA. Those accounts are not counted in financial aid calculations.

A trust on the other hand will ensure the monies stay in the trust until the child becomes of age AND decides to withdraw the funds. Making the child the owner at age 21 but if the child gets married or divorced or sued, the monies can’t be touched by those interested in getting their hands on it for less than noble causes.
Creating such a trust will cost some money.

The key here is not to tell anyone about this settlement - no friends, boyfriends, dear daughters who are not wired as this one. Loose lips sink ships as they say. One person knows, the whole school will know.
Last edited by Grt2bOutdoors on Thu Feb 13, 2020 7:21 pm, edited 1 time in total.
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aristotelian
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Re: Minor's structured settlement check - utma/ugma/trust

Post by aristotelian » Thu Feb 13, 2020 7:07 pm

Has anything changed since your last series of posts on this?

If you can legally deposit the checks in UTMA, that would likely be the easiest.

If Vanguard requires a letter of guardianship, you would then need an attorney and to go to court. Your local probate court website should tell you what dollar amount is necessary to go through guardianship. One question I have is whether the dollar amount refers to the whole settlement or each check. If the court website isnt clear about that, I would suggest calling them.

With the lump sum at 22, it sounds like the settlement was structured to avoid the guardianship process.

NotWhoYouThink
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Re: Minor's structured settlement check - utma/ugma/trust

Post by NotWhoYouThink » Fri Feb 14, 2020 9:19 am

Monies in a trust or UTMA will need to be disclosed on FAFSA or CSS profile. They will consider those funds as available for education
Which of course makes good sense, as the money is available for education. It is better to have money to pay for college than not have money to pay for college. Financial aid in the form of grants is not readily available, so consider that this money might be used to fund college for her.

Topic Author
TheCowbell
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Re: Minor's structured settlement check - utma/ugma/trust

Post by TheCowbell » Fri Feb 14, 2020 11:02 am

aristotelian wrote:
Thu Feb 13, 2020 7:07 pm
Has anything changed since your last series of posts on this?

If you can legally deposit the checks in UTMA, that would likely be the easiest.

If Vanguard requires a letter of guardianship, you would then need an attorney and to go to court. Your local probate court website should tell you what dollar amount is necessary to go through guardianship. One question I have is whether the dollar amount refers to the whole settlement or each check. If the court website isnt clear about that, I would suggest calling them.

With the lump sum at 22, it sounds like the settlement was structured to avoid the guardianship process.
Thank you - nothing has changed since my last posts except I explored the possibility of opening a trust. The more I learn about that process the more I'm coming to realize it's probably not the path I should take. I think I will go the UTMA route. We chose lump sum at 22 as it would not be included on fafsa calculations.

aristotelian
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Re: Minor's structured settlement check - utma/ugma/trust

Post by aristotelian » Fri Feb 14, 2020 11:17 am

TheCowbell wrote:
Fri Feb 14, 2020 11:02 am
aristotelian wrote:
Thu Feb 13, 2020 7:07 pm
Has anything changed since your last series of posts on this?

If you can legally deposit the checks in UTMA, that would likely be the easiest.

If Vanguard requires a letter of guardianship, you would then need an attorney and to go to court. Your local probate court website should tell you what dollar amount is necessary to go through guardianship. One question I have is whether the dollar amount refers to the whole settlement or each check. If the court website isnt clear about that, I would suggest calling them.

With the lump sum at 22, it sounds like the settlement was structured to avoid the guardianship process.
Thank you - nothing has changed since my last posts except I explored the possibility of opening a trust. The more I learn about that process the more I'm coming to realize it's probably not the path I should take. I think I will go the UTMA route. We chose lump sum at 22 as it would not be included on fafsa calculations.
I am not a lawyer, but I agree, trust does not seem right. The settlement is payable to her, not to a trust with someone else as a custodian. I am not sure that a trust is even an option.

I am worried that the total dollar amount of the threshold may require you to go through full guardianship - not UTMA - no matter what. Have you checked the limit at your local probate court and/or spoken with an attorney? According to this, you need to go through full guardianship in NY for any amount over $10,000.

https://www.nycourts.gov/courthelp/Guar ... hild.shtml

Topic Author
TheCowbell
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Re: Minor's structured settlement check - utma/ugma/trust

Post by TheCowbell » Fri Feb 14, 2020 11:23 am

aristotelian wrote:
Fri Feb 14, 2020 11:17 am
TheCowbell wrote:
Fri Feb 14, 2020 11:02 am
aristotelian wrote:
Thu Feb 13, 2020 7:07 pm
Has anything changed since your last series of posts on this?

If you can legally deposit the checks in UTMA, that would likely be the easiest.

If Vanguard requires a letter of guardianship, you would then need an attorney and to go to court. Your local probate court website should tell you what dollar amount is necessary to go through guardianship. One question I have is whether the dollar amount refers to the whole settlement or each check. If the court website isnt clear about that, I would suggest calling them.

With the lump sum at 22, it sounds like the settlement was structured to avoid the guardianship process.
Thank you - nothing has changed since my last posts except I explored the possibility of opening a trust. The more I learn about that process the more I'm coming to realize it's probably not the path I should take. I think I will go the UTMA route. We chose lump sum at 22 as it would not be included on fafsa calculations.
I am not a lawyer, but I agree, trust does not seem right. The settlement is payable to her, not to a trust with someone else as a custodian. I am not sure that a trust is even an option.

I am worried that the total dollar amount of the threshold may require you to go through full guardianship - not UTMA - no matter what. Have you checked the limit at your local probate court and/or spoken with an attorney? According to this, you need to go through full guardianship in NY for any amount over $10,000.

https://www.nycourts.gov/courthelp/Guar ... hild.shtml
Very interesting, thank you - I will bring this up with our attorney. The first check is exactly 10k (not over) but subsequent ones will bring the account over that threshold.

I'm learning to never make any financial decisions without consulting this forum first. :)

DIFAR31
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Re: Minor's structured settlement check - utma/ugma/trust

Post by DIFAR31 » Fri Feb 14, 2020 11:25 am

TheCowbell wrote:
Thu Feb 13, 2020 5:30 pm
My DD is 13 and received a small-5-digit settlement check as the first of several larger payouts that will arrive over the years.
Was the check cut directly to your daughter? If so, I would find that surprising.

When my daughters were minors, they received inheritances (investment products) when a family friend died. The three financial companies involved would only make payment to a conservator; the alternative was that the funds would be held by the companies in an interest bearing account for the girls until they reached the age of majority (state law may have played a part in this). My wife and I went to the county probate court and filled out paperwork to be appointed as conservators of our daughters' estates. The court approved, copies of the appointment documents were provided to the companies, the funds were made available to us (the parents) as conservators of the estates, and the money was invested as we best saw fit. The intent of the decedent was that the money would be used for college, so we opened custodial 529 accounts for each girl. The tax-free growth over the past 16 years has been quite good.

Grt2bOutdoors
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Location: New York

Re: Minor's structured settlement check - utma/ugma/trust

Post by Grt2bOutdoors » Fri Feb 14, 2020 11:42 am

aristotelian wrote:
Fri Feb 14, 2020 11:17 am
TheCowbell wrote:
Fri Feb 14, 2020 11:02 am
aristotelian wrote:
Thu Feb 13, 2020 7:07 pm
Has anything changed since your last series of posts on this?

If you can legally deposit the checks in UTMA, that would likely be the easiest.

If Vanguard requires a letter of guardianship, you would then need an attorney and to go to court. Your local probate court website should tell you what dollar amount is necessary to go through guardianship. One question I have is whether the dollar amount refers to the whole settlement or each check. If the court website isnt clear about that, I would suggest calling them.

With the lump sum at 22, it sounds like the settlement was structured to avoid the guardianship process.
Thank you - nothing has changed since my last posts except I explored the possibility of opening a trust. The more I learn about that process the more I'm coming to realize it's probably not the path I should take. I think I will go the UTMA route. We chose lump sum at 22 as it would not be included on fafsa calculations.
I am not a lawyer, but I agree, trust does not seem right. The settlement is payable to her, not to a trust with someone else as a custodian. I am not sure that a trust is even an option.

I am worried that the total dollar amount of the threshold may require you to go through full guardianship - not UTMA - no matter what. Have you checked the limit at your local probate court and/or spoken with an attorney? According to this, you need to go through full guardianship in NY for any amount over $10,000.

https://www.nycourts.gov/courthelp/Guar ... hild.shtml
That's ridiculous! She is the parent, by right of law she is the guardian. What you are looking at is for someone who is NOT the natural parent or a person with guardianship rights. There's no dollar threshold on how much can be held in an UTMA account.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
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Location: New York

Re: Minor's structured settlement check - utma/ugma/trust

Post by Grt2bOutdoors » Fri Feb 14, 2020 11:46 am

DIFAR31 wrote:
Fri Feb 14, 2020 11:25 am
TheCowbell wrote:
Thu Feb 13, 2020 5:30 pm
My DD is 13 and received a small-5-digit settlement check as the first of several larger payouts that will arrive over the years.
Was the check cut directly to your daughter? If so, I would find that surprising.

When my daughters were minors, they received inheritances (investment products) when a family friend died. The three financial companies involved would only make payment to a conservator; the alternative was that the funds would be held by the companies in an interest bearing account for the girls until they reached the age of majority (state law may have played a part in this). My wife and I went to the county probate court and filled out paperwork to be appointed as conservators of our daughters' estates. The court approved, copies of the appointment documents were provided to the companies, the funds were made available to us (the parents) as conservators of the estates, and the money was invested as we best saw fit. The intent of the decedent was that the money would be used for college, so we opened custodial 529 accounts for each girl. The tax-free growth over the past 16 years has been quite good.
This is not an inheritance, this is the settlement of a lawsuit where the plaintiff is the child. The attorney has done the right thing, opening a UTMA satisfies the requirement that the minor can not legally act on her own behalf, instead the guardian or parent becomes the custodian of the account until the child turns the age of 21, where the custodian then turns the title of the account into the child's name only or if the child wishes to have the parent on it. There is no probate court, there is no surrogates court - the only court involved is the one that approves the terms of the settlement.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

aristotelian
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Re: Minor's structured settlement check - utma/ugma/trust

Post by aristotelian » Fri Feb 14, 2020 11:58 am

Grt2bOutdoors wrote:
Fri Feb 14, 2020 11:42 am
aristotelian wrote:
Fri Feb 14, 2020 11:17 am

I am not a lawyer, but I agree, trust does not seem right. The settlement is payable to her, not to a trust with someone else as a custodian. I am not sure that a trust is even an option.

I am worried that the total dollar amount of the threshold may require you to go through full guardianship - not UTMA - no matter what. Have you checked the limit at your local probate court and/or spoken with an attorney? According to this, you need to go through full guardianship in NY for any amount over $10,000.

https://www.nycourts.gov/courthelp/Guar ... hild.shtml
That's ridiculous! She is the parent, by right of law she is the guardian. What you are looking at is for someone who is NOT the natural parent or a person with guardianship rights. There's no dollar threshold on how much can be held in an UTMA account.
She is not automatically guardian of property. My sons inherited TOD investment accounts from a deceased relative (intestate) and this was the process I had to go through.
Grt2bOutdoors wrote:
Fri Feb 14, 2020 11:46 am
This is not an inheritance, this is the settlement of a lawsuit where the plaintiff is the child. The attorney has done the right thing, opening a UTMA satisfies the requirement that the minor can not legally act on her own behalf, instead the guardian or parent becomes the custodian of the account until the child turns the age of 21, where the custodian then turns the title of the account into the child's name only or if the child wishes to have the parent on it. There is no probate court, there is no surrogates court - the only court involved is the one that approves the terms of the settlement.
The website I linked to above specifically mentioned settlements. If the attorney has already set up a UTMA approved by the Court I would agree, but I am not clear that that is the case. Based on OP it appears he has talked more to Vanguard than his attorney regarding what to do with the funds. If all he has is a check in hand for over $10K, I would at least check with the attorney to make sure it can go straight into UTMA. Better safe than sorry.

DIFAR31
Posts: 412
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Re: Minor's structured settlement check - utma/ugma/trust

Post by DIFAR31 » Fri Feb 14, 2020 12:09 pm

Grt2bOutdoors wrote:
Fri Feb 14, 2020 11:46 am
DIFAR31 wrote:
Fri Feb 14, 2020 11:25 am
TheCowbell wrote:
Thu Feb 13, 2020 5:30 pm
My DD is 13 and received a small-5-digit settlement check as the first of several larger payouts that will arrive over the years.
Was the check cut directly to your daughter? If so, I would find that surprising.

When my daughters were minors, they received inheritances (investment products) when a family friend died. The three financial companies involved would only make payment to a conservator; the alternative was that the funds would be held by the companies in an interest bearing account for the girls until they reached the age of majority (state law may have played a part in this). My wife and I went to the county probate court and filled out paperwork to be appointed as conservators of our daughters' estates. The court approved, copies of the appointment documents were provided to the companies, the funds were made available to us (the parents) as conservators of the estates, and the money was invested as we best saw fit. The intent of the decedent was that the money would be used for college, so we opened custodial 529 accounts for each girl. The tax-free growth over the past 16 years has been quite good.
This is not an inheritance, this is the settlement of a lawsuit where the plaintiff is the child. The attorney has done the right thing, opening a UTMA satisfies the requirement that the minor can not legally act on her own behalf, instead the guardian or parent becomes the custodian of the account until the child turns the age of 21, where the custodian then turns the title of the account into the child's name only or if the child wishes to have the parent on it. There is no probate court, there is no surrogates court - the only court involved is the one that approves the terms of the settlement.
I am aware of the differences between what OP has described and the situation that my daughters encountered, but the overall question is the same: what are the options, dictated by any legal requirements, for handling a large amount of money that has been designated for a minor.

Grt2bOutdoors
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Location: New York

Re: Minor's structured settlement check - utma/ugma/trust

Post by Grt2bOutdoors » Fri Feb 14, 2020 12:15 pm

aristotelian wrote:
Fri Feb 14, 2020 11:58 am
Grt2bOutdoors wrote:
Fri Feb 14, 2020 11:42 am
aristotelian wrote:
Fri Feb 14, 2020 11:17 am

I am not a lawyer, but I agree, trust does not seem right. The settlement is payable to her, not to a trust with someone else as a custodian. I am not sure that a trust is even an option.

I am worried that the total dollar amount of the threshold may require you to go through full guardianship - not UTMA - no matter what. Have you checked the limit at your local probate court and/or spoken with an attorney? According to this, you need to go through full guardianship in NY for any amount over $10,000.

https://www.nycourts.gov/courthelp/Guar ... hild.shtml
That's ridiculous! She is the parent, by right of law she is the guardian. What you are looking at is for someone who is NOT the natural parent or a person with guardianship rights. There's no dollar threshold on how much can be held in an UTMA account.
She is not automatically guardian of property. My sons inherited TOD investment accounts from a deceased relative (intestate) and this was the process I had to go through.
Grt2bOutdoors wrote:
Fri Feb 14, 2020 11:46 am
This is not an inheritance, this is the settlement of a lawsuit where the plaintiff is the child. The attorney has done the right thing, opening a UTMA satisfies the requirement that the minor can not legally act on her own behalf, instead the guardian or parent becomes the custodian of the account until the child turns the age of 21, where the custodian then turns the title of the account into the child's name only or if the child wishes to have the parent on it. There is no probate court, there is no surrogates court - the only court involved is the one that approves the terms of the settlement.
The website I linked to above specifically mentioned settlements. If the attorney has already set up a UTMA approved by the Court I would agree, but I am not clear that that is the case. Based on OP it appears he has talked more to Vanguard than his attorney regarding what to do with the funds. If all he has is a check in hand for over $10K, I would at least check with the attorney to make sure it can go straight into UTMA. Better safe than sorry.
The attorney is likely going to advise to take the check down to the local bank and/or investment firm and open a UTMA account. Banks and investment firms will advise the OP the same, they will not open a regular account for any minor knowing that it would be a violation of law and their own internal compliance and ethics rules. I don't think the OP has sat down with the attorney to fully understand the process, it seems like the OP only knows that the check will be payable to daughter and the years when she will receive the check. The settlement received at age 22 though will be made directly into the daughters name as once you reach the age of 21 in NYS you are considered an adult capable of making your own legal decisions unless otherwise decided by the courts.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
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Re: Minor's structured settlement check - utma/ugma/trust

Post by Grt2bOutdoors » Fri Feb 14, 2020 12:19 pm

DIFAR31 wrote:
Fri Feb 14, 2020 12:09 pm
Grt2bOutdoors wrote:
Fri Feb 14, 2020 11:46 am
DIFAR31 wrote:
Fri Feb 14, 2020 11:25 am
TheCowbell wrote:
Thu Feb 13, 2020 5:30 pm
My DD is 13 and received a small-5-digit settlement check as the first of several larger payouts that will arrive over the years.
Was the check cut directly to your daughter? If so, I would find that surprising.

When my daughters were minors, they received inheritances (investment products) when a family friend died. The three financial companies involved would only make payment to a conservator; the alternative was that the funds would be held by the companies in an interest bearing account for the girls until they reached the age of majority (state law may have played a part in this). My wife and I went to the county probate court and filled out paperwork to be appointed as conservators of our daughters' estates. The court approved, copies of the appointment documents were provided to the companies, the funds were made available to us (the parents) as conservators of the estates, and the money was invested as we best saw fit. The intent of the decedent was that the money would be used for college, so we opened custodial 529 accounts for each girl. The tax-free growth over the past 16 years has been quite good.
This is not an inheritance, this is the settlement of a lawsuit where the plaintiff is the child. The attorney has done the right thing, opening a UTMA satisfies the requirement that the minor can not legally act on her own behalf, instead the guardian or parent becomes the custodian of the account until the child turns the age of 21, where the custodian then turns the title of the account into the child's name only or if the child wishes to have the parent on it. There is no probate court, there is no surrogates court - the only court involved is the one that approves the terms of the settlement.
I am aware of the differences between what OP has described and the situation that my daughters encountered, but the overall question is the same: what are the options, dictated by any legal requirements, for handling a large amount of money that has been designated for a minor.
A vehicle that is designated with the child as the owner/beneficiary and a trustee/custodian to prudently invest/save the funds until such time the child is of legal age in the state of residency/domicile to have full title and control of the account placed in their name. A UTMA is suitable for this purpose.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

NotWhoYouThink
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Joined: Fri Dec 26, 2014 4:19 pm

Re: Minor's structured settlement check - utma/ugma/trust

Post by NotWhoYouThink » Fri Feb 14, 2020 12:26 pm

as DIFAR31 and aristotelian point out, sometimes courts require that guardians, even if they are also the parents, answer to the court about how the money is spent, which means being appointed as Guardian for purposes of managing that money. It depends on the state, but it is a good reason to make sure an attorney is involved up front.

With a UTMA account, the parents can spend money from the account for many things, and there is no accountability unless the minor sues on reaching majority. And even then, when the money is gone it is usually just gone and there is nothing to recover. With court supervision the guardian reports periodically on how the money is being used or invested. A pain in the neck, but the courts have figured out that not all parents act in the best interests of their children.

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Re: Minor's structured settlement check - utma/ugma/trust

Post by aristotelian » Fri Feb 14, 2020 12:36 pm

Grt2bOutdoors wrote:
Fri Feb 14, 2020 12:15 pm

The attorney is likely going to advise to take the check down to the local bank and/or investment firm and open a UTMA account. Banks and investment firms will advise the OP the same, they will not open a regular account for any minor knowing that it would be a violation of law and their own internal compliance and ethics rules. I don't think the OP has sat down with the attorney to fully understand the process, it seems like the OP only knows that the check will be payable to daughter and the years when she will receive the check. The settlement received at age 22 though will be made directly into the daughters name as once you reach the age of 21 in NYS you are considered an adult capable of making your own legal decisions unless otherwise decided by the courts.
I hope that is the case. When I was in the situation, my first call was to Vanguard and they said they could not help me without a letter of guardianship from the court. It is possible that OP's case is different but from what I am seeing he is over the threshold for guardianship in NY and it is not clear to me from what he has said that a lawyer or court has signed off on UTMA.

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Re: Minor's structured settlement check - utma/ugma/trust

Post by DIFAR31 » Fri Feb 14, 2020 12:43 pm

NotWhoYouThink wrote:
Fri Feb 14, 2020 12:26 pm
as DIFAR31 and aristotelian point out, sometimes courts require that guardians, even if they are also the parents, answer to the court about how the money is spent, which means being appointed as Guardian for purposes of managing that money. It depends on the state, but it is a good reason to make sure an attorney is involved up front.
No kidding... as described in a previous post, I've been through this. Although in my state, a conservator of the estate is used in a situation like this, and the process is simple enough that for most people of reasonable intelligence and motivation an attorney's involvement is not needed.

With a UTMA account, the parents can spend money from the account for many things, and there is no accountability unless the minor sues on reaching majority. And even then, when the money is gone it is usually just gone and there is nothing to recover. With court supervision the guardian reports periodically on how the money is being used or invested. A pain in the neck, but the courts have figured out that not all parents act in the best interests of their children.
My own experience is that once appointed as a guardian/conservator of the estate, there was no court supervision. No required reports, no subsequent inventories needed after an initial inventory as part of the appointment process... nothing. Obviously, YMMV, based on statutory requirements, court rules and the individual predilections of the judge involved.

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TheCowbell
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Re: Minor's structured settlement check - utma/ugma/trust

Post by TheCowbell » Fri Feb 14, 2020 1:17 pm

To clarify, the check is made out to "John Cowbell Guardian of Daughter Cowbell". I just opened the UTMA account in both my and DD's name at Vanguard and will be mailing the check in to fund it.

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Re: Minor's structured settlement check - utma/ugma/trust

Post by Grt2bOutdoors » Fri Feb 14, 2020 2:56 pm

TheCowbell wrote:
Fri Feb 14, 2020 1:17 pm
To clarify, the check is made out to "John Cowbell Guardian of Daughter Cowbell". I just opened the UTMA account in both my and DD's name at Vanguard and will be mailing the check in to fund it.
I'm sure you are aware and you've stated as much in your previous posts, Daughter Cowbell owns the money, John Cowbell is the guardian/custodian entrusted to make prudent decisions regarding the funds until child reaches age of majority in NYS which currently is 21. I'm sure you'll do the right thing by the posts you've made on this subject.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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TheCowbell
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Re: Minor's structured settlement check - utma/ugma/trust

Post by TheCowbell » Fri Feb 14, 2020 3:11 pm

Grt2bOutdoors wrote:
Fri Feb 14, 2020 2:56 pm
TheCowbell wrote:
Fri Feb 14, 2020 1:17 pm
To clarify, the check is made out to "John Cowbell Guardian of Daughter Cowbell". I just opened the UTMA account in both my and DD's name at Vanguard and will be mailing the check in to fund it.
I'm sure you are aware and you've stated as much in your previous posts, Daughter Cowbell owns the money, John Cowbell is the guardian/custodian entrusted to make prudent decisions regarding the funds until child reaches age of majority in NYS which currently is 21. I'm sure you'll do the right thing by the posts you've made on this subject.
By all means - my concerns were whether I was making the most prudent decision on the structure of monies coming in, taking into account tax/financial aid/etc consequences.

When she gets a part time job can I transfer the utma over to Roths up to the limit of her earnings, for further tax/asset protection?

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Re: Minor's structured settlement check - utma/ugma/trust

Post by Grt2bOutdoors » Fri Feb 14, 2020 8:30 pm

TheCowbell wrote:
Fri Feb 14, 2020 3:11 pm
Grt2bOutdoors wrote:
Fri Feb 14, 2020 2:56 pm
TheCowbell wrote:
Fri Feb 14, 2020 1:17 pm
To clarify, the check is made out to "John Cowbell Guardian of Daughter Cowbell". I just opened the UTMA account in both my and DD's name at Vanguard and will be mailing the check in to fund it.
I'm sure you are aware and you've stated as much in your previous posts, Daughter Cowbell owns the money, John Cowbell is the guardian/custodian entrusted to make prudent decisions regarding the funds until child reaches age of majority in NYS which currently is 21. I'm sure you'll do the right thing by the posts you've made on this subject.
By all means - my concerns were whether I was making the most prudent decision on the structure of monies coming in, taking into account tax/financial aid/etc consequences.

When she gets a part time job can I transfer the utma over to Roths up to the limit of her earnings, for further tax/asset protection?
Money is fungible, she has earnings, where the funds come should not matter but in this instance you should speak with your “head on shoulders” daughter to ensure she understands what you are prudently suggesting and why. I doubt she would not want her monies to grow tax free for a long time, and if she really needed the money she could withdraw her principal without tax ramifications but earnings must remain in the account.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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