Creating a children’s trust does not mean you are creating irresponsible teenagers, driving fancy cars, and vacationing in Cannes for the weekend. You may be picturing the old-school version of a “trust fund kid”. Don’t worry, I was too.

But children’s trusts are not just for the wealthy anymore. It’s a smart estate planning tool that may benefit your family for years to come.

Putting together a children’s trust may be easier than you think. All you need is a good estate planning attorney to create a trust deed that’s worded precisely how you want in order for your wishes to be executed.

Steps to Creating a Children’s Trust

1. Select a Trustee

First of all, quick terms to know:

Grantor / Settlor – Creator of the Trust
Trustee – Manager of the Trust

Technically, you, the grantor, can name yourself as the trustee. You can manage the trust while you’re still alive, but you must also name a successor trustee to take over for you when needed.

When choosing a trustee for your children’s trust, you must consider someone you can rely on to manage the trust funds for years to come.

A common choice for a trustee is your children’s guardian, as someone who will have your kids’ best interests at heart. The guardian will be named in your Will to care for your minor children in the event of your untimely passing.

If you prefer more of a checks and balances system, your children’s guardian and the trustee can be two different people.

 

Related Post: Who Has The Legal Power To Make Decisions For You?

 

2. Decide On The Terms of The Trust

Now that you’ve selected who will manage the trust, it’s time to decide on how your money will be distributed to or for your child or children.

If your kids are still minors at the time of your untimely death, a trust can protect their inheritance until they are responsible enough to manage the money themselves.

If your kids are older, on the other hand, but will most likely never be able to manage the money, the trustee can hold the money in trust for the child’s lifetime and distribute it as needed.

There are many ways in which your kids can inherit their share from a children’s trust. Here are a few ideas:

1. Lump-sum – if you know your kid is extremely responsible and will use the money for good instead of for evil.
2. Staggered – You can set up the trust in such a way that the assets are disbursed to your adult child only at certain ages, like 25, 35, and 45.
3. Maybe you only want to save money for your child’s college education, with the stipulation that they can access the remaining funds only after they graduate.
4. You can also split their inheritance among specific events in their life. Tagging some money for college, some for a wedding, and some for the purchase of their first home.

3. Fund The Trust

Once the trust is created, the most important part is ensuring that assets will pass to the trust, for your children to inherit.

Children’s trusts that are meant to provide control and responsible oversight for the funds are usually funded at the time of the parent’s death. While you’re alive, you are paying for most everything the child needs, so they don’t need a Trust.

But when you die, you want to make sure the money you’ve left the children is held in the trust. This requires you to make a Will that states any assets that should pass to your children should pass to the trust.

It also requires that you name the trust as beneficiary or contingent beneficiary of your retirement and life insurance. If the kids are named as beneficiaries, they get the money!

 

Related Post: 3 Simple Benefits Of A Living Trust

Why Consider a Children’s Trust?

One of the greatest goals many parents have is providing opportunities and financial security for their children, even after they are gone. A Children’s Trust is a powerful estate planning tool that allows you to do just that. Rather than leaving an inheritance outright, a Children’s Trust gives you greater control over how and when your children receive their assets while ensuring those assets are managed by someone you trust.

Children, and even many young adults, may not be prepared to responsibly manage a significant inheritance. A Children’s Trust allows you to appoint a trustee to oversee the funds and use them for your child’s benefit according to the instructions you establish. This can include paying for education, healthcare, housing, extracurricular activities, or other important expenses while preserving the assets for your child’s future.

Beyond financial management, a Children’s Trust can provide peace of mind. You can tailor the trust to reflect your family’s unique circumstances, establish milestones for distributions, and help protect your child’s inheritance from poor financial decisions, creditors, or other unforeseen challenges. Knowing that your children will be cared for according to your wishes can provide lasting reassurance for you and your loved ones.

Stand-Alone Children’s Trust vs. Testamentary Trust

When creating an estate plan, parents often have two primary options for establishing a trust for their children: a stand-alone Children’s Trust or a testamentary trust created within a Last Will and Testament. While both can accomplish similar goals, there are important differences to consider.

A stand-alone Children’s Trust is created as its own legal document during your lifetime. Because it exists independently of your Will, the trustee can begin managing your children’s inheritance without ongoing probate court supervision after your death. This often results in a more efficient administration process, reduced legal expenses, and greater privacy for your family. With fewer court-related costs, more of your assets remain available for your children’s benefit.

Another significant advantage is that a stand-alone trust becomes legally effective as soon as it is properly executed. Because it already exists, it can be named as the beneficiary of life insurance policies, retirement accounts (when appropriate), or other beneficiary-designated assets. This flexibility is not available with a testamentary trust because the trust does not legally exist until after your death and after your Will has been admitted to probate.

A testamentary trust, on the other hand, is created within your Will and only comes into existence after your death. Since it is part of the probate process, the administration of the trust is generally subject to probate court oversight. While testamentary trusts remain an effective planning tool in certain situations, they may involve additional court procedures, longer administration, and increased costs when compared to a stand-alone trust.

The right option depends on your family’s circumstances, the types of assets you own, and your long-term planning goals. An experienced estate planning attorney can help determine which approach best meets your needs.

Work with an Estate Planning Attorney

Creating a Children’s Trust is not a one-size-fits-all process. Every family’s financial situation, goals, and concerns are different. An experienced Connecticut estate planning attorney can help you determine whether a stand-alone trust or testamentary trust is appropriate, select the right trustee, establish distribution guidelines, and ensure your trust works seamlessly with the rest of your estate plan.

At Reed Wilson Case, we help Connecticut families create personalized estate plans designed to protect their children, preserve their assets, and provide peace of mind for the future. By planning today, you can help ensure your children receive not only an inheritance, but the financial guidance and protection they may need for years to come.

Related Post: What Is A Revocable Trust & Irrevocable Trust

Disclaimer: The information provided in this article does not, and is not intended to, constitute legal advice and is for general informational purposes only.

Let Us Know How We Can Help!

Please fill in your contact information and a brief message about what you need help with. A consultation will need to be scheduled in order to provide legal guidance.