When you leave money or property for a child to inherit, arrange for someone to manage it.

Providing for your children in case you die prematurely takes more than picking someone to raise them (for more information, see Guardianship for Your Children). You should also consider what will happen to any money or property your children inherit from you. Who will manage it for them until they became adults? You can leave these instructions in your will or living trust.

Many parents don't leave money directly to their children. Instead, they leave everything to each other, with the understanding that the survivor will care for the children. They name their children as alternate beneficiaries. Many single parents, however, leave property directly to their children.

Either way, you should arrange for someone to manage whatever property they may inherit, in case they receive it while they're still too young to manage it themselves. You can take care of this in your will or living trust.

What Happens Without Property Management

If you don't arrange for property management for young children (under 18), the probate court will do it for you by appointing someone to serve as the children's "property guardian." The court often appoints the other parent -- but not in every case.

This arrangement comes with some headaches. Usually, a court-appointed guardian must make frequent reports to the court and has limited authority to decide how the property should be managed. There's one exception: If relatively small amounts of property are involved, many states allow an executor to appoint a custodian under the Uniform Transfers to Minors Act (discussed below) to manage the property.

If your children are 18 or older when they inherit from you, they'll have complete control of the property unless you specify otherwise in your will or living trust.

Options for Property Management

Fortunately, it's easy to avoid the uncertainties and hassles of court-appointed guardianship, or the worry that a 20-something beneficiary may not manage an inheritance wisely. You can choose someone, now, to manage any property that your minor or young adult children may someday inherit from you. There are lots of ways to structure this arrangement. Here are four of the simplest and most useful.

1. Name a Property Guardian in Your Will

If you wish, you can simply use your will to name a property guardian for your child. Then, if at your death your child needs the guardian, the court will appoint the person you chose as property guardian. The property guardian will manage whatever property the child inherits, from you or others, if there's no mechanism (a trust, for example) to handle it.

2. Name a Custodian Under the Uniform Transfers to Minors Act

The Uniform Transfers to Minors Act (UTMA) is a law that has been adopted in substantially the same form in almost every state. (The holdouts are South Carolina and Vermont.) Under the UTMA, you may choose someone to manage property you are leaving to a child. This person is called a custodian. If you die when the child is still under the age set by your state's law -- 21, in most states -- the custodian will step in to manage the property. (Older offspring get their property outright.)

To set up a custodianship, all you need to do is name a custodian and the property you're leaving to a young person. You can do this in your will or living trust, or when you name a beneficiary for an insurance policy, if you're leaving life insurance proceeds to your kids. For example, your will might state, "I leave $10,000 to Michael Stein, as custodian for Ashley Farben under the Illinois Uniform Transfers to Minors Act." That would be enough to create the custodianship (if it's ever needed).

In most states, a UTMA custodianship ends when the beneficiary is 21. But a few states end them at 18, and a handful allow you to extend the age to 25. If you don't want the beneficiary to get the property so young, you may want to use a trust (discussed below) instead.