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Trusts for Minor and Adult Children

For most parents, the spouse is the primary beneficiary named in their will. In the case of a catastrophic event where both parents die, parents then usually name their children as the secondary beneficiaries.

When the children are minors, common sense dictates that it is best not to give them the assets directly as they are still too young to manage their finances. Instead, the will provides for a trust to be established for any minor child with a trusted adult named as the trustee of that trust. The trustee manages the assets until the child reaches a mature age.

When children are in their late 30s or 40s, there is usually no need for a trust as they are most likely established adults with the ability to manage their finances.

For those children who are between the ages of 18 and 35, whether a trust is needed or not depends entirely on the parents’ values and the disposition of the children involved.

Receiving a large sum of money during college may cause a student to drop out and explore the world. Some adult children may lose the incentive to be gainfully employed when they have their inheritance available. If an adult child marries young and then divorces (which does happen), any inheritance received may be lost to that spouse in the divorce. For these reasons, some parents may want to defer giving their adult children a large sum of money. An estate planning attorney can help address these concerns in the will with more specific trusts.

A Common Trust can be formed which will benefit all of the children until the youngest child reaches a certain age. This Common Trust allows the trustee to pool the assets of the parents and care for each child as needed for their health, maintenance and education. By ending when the youngest reaches a specific age, the assets are not necessarily allocated equally during the term of the trust. Instead, all of the assets are available for whatever happens to any of the children which usually reflects how parents deal with multiple children. When the Common Trust ends, the remaining assets are then equally divided among the children.

Another option is to create both a Common Trust and then a Separate Trust for each child. Once the Common Trust ends, the remaining assets can be divided equally but remain in a Separate Trust, one for each child, until a later age so as not to overwhelm the adult child with a large some of money. The trustee would have the discretion to distribute money for graduate school, the down payment on a house or a business venture to that particular child or make equal distributions to that child over a longer period of time.