Acquisition of Property by Minors

In their wills, many parents choose to leave property to their children. Others may give their children certain property while they are still living. Children may also have an interest in property as a result of a trust set up by one or both of their parents. But, what if these children are still minors? Is it legal for a parent or natural guardian to transfer property to minors? Who is authorized to make decisions with regard to that property? Can the minors themselves make decisions to alter or sell the property?

Generally, “[t]he fact that a person is a minor does not prevent him from acquiring and holding title to property.” Watkins v. Watkins, 123 Fla. 267 (1936). However, complications often arise out of a minor owning real or personal property or having some other property interest transferred to him or her, such as having to pay property taxes on real estate. In this circumstance, the natural guardian of the child will have to assist the child. When the aggregate sum of the property does not exceed $15,000, the natural guardian(s) of a minor may “(a) settle and consummate a settlement of any claim or cause of action accruing to any of their minor children for damages to the person or property of any minor children; (b) collect, receive, manage, and dispose of the proceeds of any settlement; (c) collect, receive, manage, and dispose of any real or personal property distributed from an estate or trust; (d) collect, receive, manage, and dispose of and make elections regarding the proceeds from a life insurance policy or annuity contract payable to, or otherwise accruing to, the benefit of the child; and (e) collect, receive, manage, dispose of, and make elections regarding the proceeds of any benefit plan . . . of which the minor is a beneficiary, participant, or owner.” Fla. Stat. § 744.301(2). However, when the amount of the property exceeds $15,000, the rights of the natural guardians are limited and subject to review and permission of the court. Until the minor reaches the legal age of majority, he or she is under a type of “disability” because she lacks the capacity to enter into binding contracts. However, if the minor does not want to sell the property or does not need to sell the property, he or she may choose to hang on to the property until he or she reaches the age of majority.

If the child needs to sell or mortgage the property, there are three ways in which this objective can be accomplished. First, a guardianship may be established. The only way for the minor to take out a mortgage or sell the property in this manner is to go to court, open a guardianship, appoint a guardian, get a court order authorizing the transaction, and have the guardian execute the deed or mortgage. In Florida, the guardian statute “confers no right to intermeddle with the property of the infant, but is a mere personal right in the father or other ancestor to the custody of the person of his heir apparent or presumptive until attaining 21 years of age.” McKinnon v. First Nat’l Bank, 82 So. 748, 750 (Fla. 1919). Florida Statutes provide certain actions that a legal guardian may take, and the guardian is bound by a duty to act in the best interest of the minor.

Secondly, a trust can be established. A trust is a more practical way to deal with children owning real estate, where title is conveyed to the trustee of the trust, or the trust is set up in a probate. In that case, or in the case of a sale or mortgage, the title company or bank will need to see the trust document or will.

Finally, a custodianship is a simple alternative to the other two options. Under this option, title is conveyed to an adult of legal age, pursuant to the Florida Uniform Transfers to Minors Act. Under the Uniform Transfers to Minors Act, the custodian is required to: “(1) take control of the custodial property; (2) register or record title when necessary; and (3) collect, hold, manage, and invest and reinvest the property.” Fla. Stat. § 710.114(1). In addition, a “custodian has all the rights, powers, and authority over custodial property that unmarried adult owners have over their own property, but may exercise that power and authority only in a custodial capacity.” Fla. Stat. § 710.115(1). If the property is sold, the money from that sale would still belong to the minor. A custodian is subject to liability for a breach of duty regarding care of the custodial property.

Once the minor reaches the age of majority, the custodian or the trustee is to convey the property to the minor. But as an adult, the former “minor” can deal with the property in his or her own name. With a guardianship, the court action needs to be closed, and the property distributed to the minor. Fla. Stat. 518.11 requires the exercise of reasonable care and caution and is to be applied to investments in the context of the entire investment portfolio as part of an overall investment strategy that should incorporate risk and return objectives.

If you or someone you know has an issue regarding property transfers to a minor or you would like to take appropriate action to prevent potentially problematic issues with such a transfer, please do not hesitate to contact the law offices of Chepenik Trushin LLP. The experienced attorneys at Chepenik Trushin are ready, willing, and able to assist with these estate planning needs. Please feel free to contact us for an initial consultation.