Children today can own considerable assets, whether through inheritance, gifts or through their profession, for example as young actors or athletes. What protection does the law provide for their property, who administers it, and what is the procedure for conflicts between parents or conflicts of interest?
Children can acquire property in a variety of ways, whether it is earnings from artistic or sporting activities, inheritances or gifts. These earnings belong to the child, not to the parents, although they are usually the ones who manage them.
Another common source of wealth is inheritance. If a minor child inherits property from relatives, he or she must be represented in inheritance proceedings. Representation is usually carried out by the parents, unless there is a conflict of interest. For example, if one of the parents would also have a share in the inheritance, the court may appoint an independent guardian.
Children may also receive property by way of a gift, for example from grandparents or other relatives. In such cases, the parents have a duty to manage the donated property with due care.
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Children may dispose of their property only to a limited extent, in accordance with their intellectual and legal capacity. The law stipulates that minors do not have full legal capacity and therefore most legal actions are carried out by their parents as legal guardians. Exceptions are minor matters of daily life, where the child may act independently if this is appropriate to his age and maturity. For example, a 12-year-old can buy clothes or books for a reasonable amount without needing parental permission.
More complex situations arise for higher value property transactions, such as the sale of valuables, the disposal of savings or the negotiation of contracts. The child cannot take these steps independently. If major decisions are to be made, such as investing or donating property, court approval is required.
The age of the child plays an important role. Older minors, such as 16-year-olds, can make some decisions independently in certain circumstances, especially if they have earned their own income from part-time jobs or businesses.
The management of a minor child’s larger assets is primarily entrusted to his or her parents, who exercise this responsibility as part of their parental responsibility. Parents have a duty to act with due care, which means that they must manage the child’s property in such a way that it is protected and preserved or appreciated. This management includes both movable and immovable property, funds or other assets acquired by the child.
Parents, as the legal guardians of the child, have the right to administer the child’s property, and the law distinguishes between ordinary and “non-external” administration. Ordinary administration includes routine acts that do not burden or significantly alter the value of the child’s property. This includes, for example, paying current bills, managing the proceeds of an estate or making purchases appropriate to the child’s age and needs.
Conversely, non-cash management includes decisions that may have a significant impact on the child’s assets. Typical examples are the sale of real estate, entering into loan agreements, donating valuable property or disposing of securities. These actions require the approval of the court, which assesses whether the planned decision is really in the best interests of the child. If parents take such action without the court’s approval, it is legally invalid.
In certain situations, the management of the child’s property may be entrusted to another guardian. This happens, for example, if the parents cannot agree on the administration or if their decision might be contrary to the child’s interests. The court may also decide to appoint a guardian in cases where the parents are unable to perform their functions due to death, incapacity or other serious circumstances.
The administration of the child’s property ends when the child reaches the age of majority, when the parents transfer the property to the child.
Disagreements between parents over the administration of a child’s property are not uncommon, especially in cases where the child is the owner of valuable assets such as real estate, savings or an inheritance. Parents, even if divorced, have equal parental responsibility towards the child, which means that they should decide together on important issues, including the disposition of the child’s property.
If the parents cannot agree, it is possible to go to court, which will decide on the basis of the best interests of the child. Court proceedings may include, for example, whether to sell, invest or otherwise use certain assets. The court may order mediation between the parents or proceed to appoint a guardian to manage the property independently of their decisions.
In cases where there is a risk of harm to the child’s interests, the court may also limit the parents’ right to dispose of the child’s property. For example, if one of the parents would act solely in his or her own interests, the management of the property may be entrusted to a guardian.
If the heir is a minor child, this brings specific procedures into the succession proceedings. Minors do not have full legal capacity and must therefore be represented in the proceedings. Representation is most often carried out by parents as legal guardians. However, if there is a conflict of interest, for example if one of the parents is also an heir, the court appoints an independent guardian.
Key steps in the succession procedure include the decision to accept or reject the succession. Such a decision on behalf of the child cannot be made without the consent of the guardianship court. The court carefully assesses whether it is in the best interests of the child to accept the inheritance, especially if the testator has left debts that could exceed the value of the estate.
After the succession proceedings have been completed, a trustee may be appointed for the child to administer the estate until the child reaches the age of majority. This administrator has a duty to dispose of the property prudently and solely in the interests of the minor. The court may order periodic reports on the administration to ensure the protection of the child’s property.
Minor children are also entitled to a compulsory share of the estate if the testator has omitted them in his will. This right is given by law and amounts to up to three quarters of the legal share for minors.
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Tip: How does the age of the child affect his or her legal options and responsibilities? When can a child legally act independently and how is liability for damage caused by minors assessed? What is the difference between partial and full legal capacity, and when is a limitation of legal capacity approached?
When a child reaches the age of majority, usually at the age of 18, he or she acquires full legal capacity and with it full control over his or her property. Until then, the property was administered by the parents or other legal guardians, or by a court-appointed guardian or special administrator.
When the property is handed over, the child has the right to demand a detailed account from the administrators. This should include information on income, expenditure and any major legal dealings relating to the property. Should the administration not be carried out in accordance with the due care of a good steward, the adult child has the possibility of seeking compensation for any damage through the courts.
The property may pass to the child not only automatically on reaching the age of majority, but also earlier if the child becomes fully competent, for example by marriage or by a court decision. In such a case, the administrator must also hand over the property and file an account.
Mrs Jana, the young mother of her eight-year-old son Matthias, found herself in an unusual situation when her son inherited a considerable sum of money from his grandparent. The money had been paid into an account in the child’s name, and although Ms Jana wanted to value the sum, she encountered an unexpected problem. She decided to transfer the money to a savings account also in Matthias’ name so that the amount would be saved and not left lying idle. To her surprise, however, the bank informed her that it needed the court’s approval for such a move, as it involved the disposal of the property of a minor child.
Jana and I prepared an application for approval to transfer the amount of money into a savings account, which we filed with the local district court. In the application, we explained that the proposed move was in the best interests of Matthias – the savings account offered a more advantageous appreciation of the funds and would ensure that the money would be better protected and prepared for the boy’s future needs, such as his education.
After a brief hearing, the court issued a decision approving the transfer of the amount into the savings account.
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