When you make a Will you can set up property management for young beneficiaries who cannot or should not receive the property outright until they are older.
One of your options for property management is to create a child’s trust for your minor beneficiaries. A child’s trust is a legal structure you can set up in your Will. In it, you can direct that money and/or property slated for a young beneficiary must be managed by a trustee until the child turns an age you choose.
The trustee’s powers are listed in your Will, and they give the trustee wide discretion to use trust assets for the basic educational, health care, and daily needs of the beneficiary. Property in the child’s trust can also be used to fund training or a college or graduate school education, or to start a household. All property you leave to a beneficiary for whom a trust is established will be managed under the terms of the trust.
Choosing a Trustee
The trustee you name will manage and spend the property for the benefit of the young beneficiary until he or she becomes the age you specify.
The person you name to manage the trust should be reliable, honest, and capable of prudently managing resources. He or she should also live near the child if at all feasible.
If possible, you may wish to name the same person who will be the child’s personal guardian. This will often be the child’s other parent. If the other parent isn’t available, or can’t be trusted to manage the child’s property, name another adult that could handle the job – preferably one who can work well with the person you’ve chosen to be the child’s guardian.
Finally, be sure to speak with your choice and get consent before you name him or her as trustee.
Naming an Alternate Trustee
It is not necessary, but highly recommended, to name an alternate trustee if your first choice is unable to perform his/her duties as trustee. If you haven’t chosen an alternate, a judge will appoint a trustee. This will cost time and money, and you will no longer be able to influence who will manage the child’s property.
The same considerations for your first choice apply when choosing an alternate trustee.
Choosing an Age to End Management
Here you decide how old you want the beneficiary to be when the trust ends and the beneficiary receives the property outright. When choosing an age, consider the amount of money involved, the beneficiary’s likely level of maturity as a young adult, and the degree to which the property you’re leaving will require sophisticated management.
Do Not Use This Trust for Beneficiaries with Special Needs
This child’s trust does not provide the complicated and intensive management needed for those who have mental or physical disabilities or who have other severe problems such as substance abuse. You should also not use this child’s trust to a beneficiary who receives government disability benefits your gift would jeopardize the beneficiary’s eligibility. Consulting a lawyer to determine the best legal options available will enable you to avoid these potential problems.
Explaining Your Decisions
If you want to explain the choices you make in your Will, we suggest that you do so in a letter that you attach to the Will rather than in the Will itself. This avoids any chance that you will accidentally add confusing or conflicting language to your legal document. A letter to survivors is a good, informal way to share the thoughts and reasons behind your decisions. If you want to write one, we can offer guidance and examples to help you along.
Creating a Will with a Child’s Trust
A Will must comply with applicable state law and Will formalities in order to be valid and legally binding. Accordingly, as with all legal documents, it is advisable that you retain an attorney to draft your Will. The cost to draft one is minimal compared to the importance of properly setting-forth your wishes for the handling of your money and property – and for the care of your children after your death.