Monthly Archives: October 2010

A Trust for a Minor or Young Adult Child

If you have a minor child or a child in the late teens or early twenties, you should consider leaving your child’s inheritance to a trust, rather than to your child outright. Why? 

  • The establishment of a trust will avoid the necessity of having a court appoint a conservator for a child under age 18.  (Even the child’s surviving parent or guardian will be required to have to seek appointment as conservator before funds can be distributed from your estate and used for your child’s benefit.  This is required by law, and will take time and money)
  • A trust will prevent your child’s receiving his or her inheritance at age 18.  Even responsible children in this age group can make impulsive financial decisions.  The placement of the funds under the control of a trustee will ensure that your child’s inheritance is responsibly managed until your child is ready to do this on his or her own.
  • A trust will enable you to choose a reliable person to act as trustee for your child.  It is not necessary that it be a bank or trust company:  you can choose a family member or friend.
  • A trust can direct what types of things your child’s inheritance can spent on, such as college or vocational training. 

A trust of this type need not be expensive or complicated.   The trust can be relatively simple and made part of your will.  It is not necessary to place funds in the trust now.  Rather, funds (or other assets) will go into the trust upon your death.  

I have prepared many hundreds of these trusts for clients with children who are minors or young adults.   Typically the trust directs the trustee to use funds for the child’s health, education and support until the child reaches age 19 or graduates from high school.  Thereafter, the trustee is directed to use the funds for college of other post-secondary education, as well as living expenses if the child is enrolled full time.    Most clients choose to have the trust end, and the child’s inheritance released to the child, at age 25.  (I had one very protective mother insist that her son should not get his full inheritance from the trustee until age 50, which I thought was a bit much.)  Other clients direct the trustee to distribute income from the trust investments automatically over a period of years, as well as installments of principal from time to time. 

However, the terms of the trust are entirely up to you, and can be tailored to fit your situation and your goals for your child.

Trusts 101

Clients frequently come into my law office asking “Should I (or we) have a trust?”  My answer is always “It depends on your situation and what your goals are.” 

Then I ask clients, “What are your goals?   What are the concerns you have that make you think about having a trust?”   These concerns may include:

  • Providing for a minor or young adult child
  • Providing for a disabled person
  • Providing for a pet
  • Avoiding probate
  • Minimizing estate tax
  • Preserving your assets against the high cost of nursing home care
  • Keeping your vacation home in the family.

There are many different types of trusts, for many different purposes:

  • A trust for a minor or young adult child;
  • A “special needs trust” for a disabled person;
  • A trust for the care of an animal;
  • A revocable living trust, to avoid probate;
  • A tax-oriented trust, to reduce estate taxes;
  • A trust to preserving your assets against the high cost of nursing home care;
  • A trust to hold your vacation home for the benefit of your family.

In the coming weeks, I will write about different types of trusts which can be useful depending on the client’s situation. Later this week:  Trusts for minor or young adult children.