Protect Minor's and Their Inheritance From Themselves: Will versus Trust

/ Jeppesen Law, PLLC/

If you wish to leave an inheritance to someone, whether your children or grandchildren, that is a minor, immature, or currently unsettled and are not yet mature enough to receive that inheritance, a Living Trust or Testamentary Trust (which is created in a Will) are favorable options to protect the inheritance until your family members gain a certain level of maturity.

You can dictate in either of the Trusts exactly what the property can be used for.  Usually that involves specifying that the property can only be used to provide for the “support, care, maintenance, and education” of the beneficiary.

You can also determine the age or ages at which the remaining property will pass outright to the heir. It is generally the custom to divide the individual distributions up into a number of payouts.  For example, you could leave 33% of the inheritance to the beneficiary at age 25.  50% of the remaining share at age 30.  And the balance at age 35, at which time the Trust would terminate.  In between those distributions, the Trust funds would still be available to the beneficiary for specified distributions and for their support, care, maintenance, and education.

Dividing the distribution into installments is beneficial because if your beneficiary thoughtlessly spends the first distribution, he or she will will be older at the next distribution and will hopefully have learned from that mistake and handle the remaining distributions more thoughtfully.

So, which option, Living Trust versus Testamentary Trust, is better for protecting minors from wasting their inheritance? In this situation, neither has a distinct advantage. Some factors to consider:

  1. Living Trusts cost more to set up, but save money in the end because of the lack of Probate (Read here to understand what is Probate);

  2. Testamentary Trusts, which are created in a Will cost less than Living Trusts, but require Probate to obtain authority;

  3. Testamentary Trusts are not found in Simple Wills, which bequest gifts immediately to the heirs and do not have the distribution provisions mentioned above;

  4. Compared to Will based options, Living Trusts require substantial legwork upfront;

  5. Testamentary Trusts have no authority until you pass away and your Will is Probated; and

  6. Either option allows you to name Guardians for your minor children and Conservators of your children’s inheritance.

Jeppesen Law can provide you with a comprehensive Estate Planning. With our Free Initial Consultation we help our clients explore their own situations and plan for their futures. If you have more questions, we'd love to help! Contact Jeppesen Law now. We wish you all the best. (208) 477-1785.