New York Estate Planning & Elder Law Blog
While parents make the vast majority of decisions for their children, it comes as a surprise to many that they cannot automatically make decisions regarding a trust or estate in their child’s name. Estate law protects the interests of the beneficiary above all others, even from the parents of a minor beneficiary. If a parent is not able to sign for their child’s trust or estate, a court appointed guardian is assigned that is also known as virtual representation.
Virtual Representation
The concept of virtual representation occurs when an adult is appointed to speak on behalf of a minor trust beneficiary. Many of the provisions regarding virtual representation are found in the Uniform Trust Code (UTC), Uniform Probate Code (UPC), and state laws. Essentially, virtual representation gives a minor beneficiary the power to speak through an adult that actually has legal capacity to make decisions. A virtual representative can be appointed for minors, incapacitated adults, unborn children, unascertained beneficiaries, and adult beneficiaries that cannot be found.
The main point of a virtual representative is that they make decisions that are in the best interest of the beneficiary and cannot have any conflict of interest with the trust or estate. In addition, a virtual representative can be given powers that are broader than given in the UTC or state law. If the virtual representative is assigned to a beneficiary through the UPC, probate administration can be made much simpler.
The Need for Virtual Representation
Without a virtual representative for minor beneficiaries, the handling of the minor’s accounts would be placed in the hands of a court-appointed guardian or conservator. All communications, notifications, accounting, and decision making are made by these appointed individuals. Every decision is binding on the minor beneficiary, regardless of whether the minor agrees. A guardian or conservator essentially eliminates the minor from the decision making process of their own assets and cannot be released from the situation without the court’s approval.
A virtual representative is there to explain and work with the minor or other beneficiary to determine the correct course of action. While the specifics of each virtual representation are different, they are all meant to keep the minor apprised of the decisions that are being made about their assets. In addition, a beneficiary can challenge the decisions of a virtual representative and does not necessarily need to get the approval of the court to terminate the relationship.
Gifts and Transfers to Minors
The Uniform Transfers to Minors Act (UTMA) and the Uniform Gifts to Minors Act (UGMA) were enacted to help with transfers or gifts made to a minor beneficiary through a trust or estate. These acts allow a virtual representative to hold funds for the minor’s benefit until the beneficiary reaches a certain age.
It allows for the virtual representative to handle the account instead of appointing yet another guardian or conservator just for the account. It not only simplifies the process, but it also saves on the costs of another administrator involved in the beneficiary’s affairs.