When a child receives money or property in Virginia, whether from a life insurance policy, inheritance, or other assets, it doesn’t just go to the parents. Even if the parents are living and involved, Virginia law treats a minor’s estate separately. That can lead to a long, expensive process if no estate plan is in place.
In these cases, the court doesn’t assume that a parent can automatically manage the money. Unless a trust has been created to receive and manage the asset for the minor, the courts will have to step in to supervise the transfer.
Guardianship of the Estate vs. Guardianship of the Person
In Virginia, parents are considered the natural guardians of the minor, which means they’re responsible for the child’s care and well-being. But they are not automatically allowed to manage the child’s money or property.
If a minor inherits money or becomes the beneficiary of a life insurance policy or retirement account, a court must appoint a guardian of the estate of the minor. This is often called a conservatorship in other states. Virginia uses a slightly different term, but the process is similar: it creates a court-supervised role to manage the child’s money until they turn 18.
The person appointed to manage the money must be approved by the court, report to the Commissioner of Accounts, and follow strict rules about how the funds are used.
It’s Expensive and Long-Term
Setting up a guardianship of the estate for a minor in Virginia usually takes around three months to complete. The initial legal fees and court costs typically range from $7,000 to $10,000 per child. That’s just to get it set up.
Once the guardianship is in place, the person managing the money (often a parent or close relative) must file annual reports to the Commissioner of Accounts. That process usually requires hiring a CPA and an attorney, both of whom charge fees. The reports continue every year until the child turns 18.
On average, annual compliance costs fall between $5,000 and $10,000 per year. These fees come out of the child’s inheritance. Then, on the child’s 18th birthday, they receive full access to all remaining funds, regardless of maturity or financial readiness.
This is one of the main reasons many families choose to create a trust for a minor child instead.
Why a Trust Works Better
When assets are placed in a properly drafted trust for a minor, there’s no need for a court-ordered guardianship of the estate. The trust can:
- Be managed by someone you choose in advance
- Avoid court supervision and annual reporting
- Allow flexible rules about when and how funds are used
- Delay full access beyond age 18
Unlike a guardianship, a trust can be built to match your family’s values and goals. You might want the child to receive money for education only, or to hold off on full access until age 25 or later. A trust gives you those options without triggering thousands of dollars in court-related expenses.
A Common Example
Let’s say a grandparent names a minor grandchild as the beneficiary of a life insurance policy. If that grandparent dies, the insurance company will not release the funds directly to the child. Even with living parents, the family must go to court and have a guardian of the estate appointed. Until that happens, the funds are frozen.
If the grandparent had instead created a trust and named the trust as the beneficiary, the money could be accessed and managed immediately with no court involvement and no annual reports. But the grandparent must create the trust before they die.
Final Thoughts
Minor children shouldn’t have to lose part of their inheritance to legal fees and court costs. But that’s exactly what happens if a guardianship of the estate becomes necessary. In Virginia, this process is costly, time-consuming, and ends with a young adult gaining full access to the (depleted) funds on their 18th birthday.
A trust is a simpler, more affordable solution. It gives you control, reduces expenses, and protects the inheritance long after childhood ends.
Norton Pelt helps Virginia families plan ahead with trusts that avoid court and keep assets protected. If you want to make sure a child’s future is handled the right way, contact us today to start the conversation.
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