Why a Trust for Your Child Should Mature with Your Child

From the moment a child is born, a parent feels an instinctive drive to protect and nurture. We childproof our homes, carefully choose schools, offer guidance through adolescence, support their careers, and watch with pride as they start their own lives. The desire to be there for them extends beyond emotional and physical care. Finances also play a crucial role, and without proper planning, even the best intentions—yours or theirs—can fall short.

With the future in mind, you may have established a trust for your child at birth or shortly after, knowing that you would not always be there to financially support them. However, just as children outgrow toys, clothes, and bedtime stories, they can also outgrow the terms of the inheritance you created for them in their early life. A trust that worked when your child was 5 years old may no longer meet their needs and protect them effectively at 25, 35, or 45.

Like your living, breathing child, the trust you create for them must grow as they do. It should be a flexible, evolving legal tool that matures alongside them, from first steps to first jobs, from childhood to adulthood. You may not always be there, but with the right trust setup and thoughtful updates, your care and protection can be.

Trusts for Minor Children

Parents look at their newborns and think they are perfect just the way they are. Nothing needs changing. But as the years pass, can you say the same about the estate plan you made long ago for their benefit?

If a minor inherits money and property outright—whether through a will or beneficiary designation on an account such as a 401(k) or life insurance policy—they generally cannot access those funds until they reach the age of majority (age 18 in most states). While they are minors, managing and using any money and property given to them will likely require court involvement. And that process is rarely as picture-perfect as the child it is meant to protect.

Here is what happens if a minor inherits without a trust in place:

• A court typically appoints a guardian of the estate (called a conservator in some states) to manage the funds. That person may not be someone you would have chosen yourself, and they must operate under strict judicial oversight.
• The guardian of the estate is required to act in the child’s best interest, but their actions are limited by court-ordered spending restrictions, public reporting, and annual accounting. Also, what the guardian and the court consider to be in your child’s best interest may not align with what you believe is best for them. Without clear instructions in a legal document, the guardian of the estate may have no way of knowing your true intentions.
• When the child reaches age 18 or 21, depending on the state, the entire balance of the account that was managed with court oversight is then handed over to them with no further guidance or restrictions—ready or not.

Conservatorship (or guardianship) is an impersonal, inflexible process. Worse, it means losing control over who manages your child’s inheritance, how it is used, and when your child receives it.

A trust bypasses this system entirely and allows you to do the following:

• Appoint someone you trust (such as a family member, professional, or corporate trustee) to manage your child’s inheritance;
• Specify how the money can be used and for what, such as education, healthcare, living expenses, enrichment, other essentials, or at the trustee’s complete discretion;
• Delay your child’s full access to their inheritance beyond age 18 or 21 using staggered distributions, trustee discretion, or milestones such as completing college or reaching financial literacy goals.

A trust lets you protect your child’s future on your terms. You know your children best—and you know that they may not be ready to manage an inheritance just because the calendar says that they are 18. By using a trust and appointing someone who is responsible for managing their money for them while they are still coming of age, you can set your child up with an inheritance structure that is (almost) as perfect as they are.

Trusts for Young Adults

Your child will not remain a child forever. Part of being a parent is accepting their transition from childhood to adulthood. However, that does not always mean letting go of the reins all at once.

The idea that a child will magically become financially responsible at a fixed age such as 18, 21, or even 25 is often unrealistic. Most young adults are still in school or just beginning their careers in their early 20s. They may be juggling student loans, entry-level jobs, or their first serious relationship.

This stage of life is about experimentation and exploration. As you likely remember, early adulthood is not a straight line. It is full of detours, resets, and reimagined goals. A sudden inheritance during this phase may be overwhelming and could derail hard-earned progress.

• Most young adults lack experience with budgeting, investing, and identifying financial red flags, whether they come in the form of peer pressure, risky ventures, or scams.
• A windfall might unintentionally discourage long-term planning, education, or steady employment.

A thoughtfully designed trust can ease your children into financial responsibility and help them avoid rough spots on the road to adulthood.

• Trusts can be structured with age-based distributions (e.g., 25 percent at age 21, another portion at age 25, and the rest at a later age), or they can give the successor trustee full discretion to decide when your child is ready to receive part or all of their inheritance.
• Trusts can also structure inheritance distributions to encourage certain behaviors—such as staying gainfully employed by matching distributions to earned income—or reward certain achievements—such as providing a lump-sum gift upon college graduation.

These options allow you to slowly release the trust’s reins, giving your child time to grow, mature, and take control when the road is not so bumpy and the path ahead is clearer.

At the same time, not all young adults mature at the same pace or share the same goals. Some are precocious, others are late bloomers. Some may be ready to handle money responsibly in their late teens or early 20s, while others need guidance well into their 30s. They may want to start a business, travel, become an artist, enter public service, or experiment with investing.

A flexible trust makes allowances for child-specific differences in personalities and goals.

• It can encourage financial maturity by paying for or providing distributions of the child’s inheritance if they complete personal finance courses or work with a financial advisor or other type of mentor who can help them responsibly manage their funds.
• It can transition from having a third-party trustee to allowing the child to act as a co-trustee or even sole trustee once they demonstrate readiness.
• It allows the trustmaker to create different trust structures for each of their children, taking into account their individual life paths and maturity levels.

Letting your child gradually take on financial responsibility within the protective frame of a trust prepares them for full independence. They can learn, safely make mistakes, and grow into a confident steward of their inheritance.

Trusts for Changing Needs and Grown-Up Responsibilities

Not only do children change as they grow up but the circumstances around them are also continually shifting. A trust must be malleable enough to conform to their evolving needs, emerging risks, and new family roles as your child matures into full adulthood.

Teenagers and young adults often require support for college, vocational training, or career startup costs. As adults, they may need help with major purchases, such as a home, or with long-term goals, like retirement planning.

But what about financial needs that we do not see coming? A trust must prepare for the unexpected every bit as much as the expected.

• Establishing a career is rarely straightforward. A change in jobs or career path, the decision to go back to school, a business venture, or an investment opportunity might necessitate access to funds in ways not originally conceived.
• Not every adult becomes a prudent money manager. Addiction, reckless spending, manipulative relationships, or a propensity to fall for get-rich-quick schemes are a few reasons why some beneficiaries might need more guardrails. A spendthrift clause can help protect the trust’s accounts and property from a child’s bad decisions, creditors, and other financial risks.
• Estate planning for your child involves contemplating the unthinkable: What if something happens to you? It should also ask an arguably more difficult question: What if something happens to them? An accident or disability can strike your child at any time. If they find themselves requiring needs-based government benefits (e.g., Medicaid or Supplemental Security Income), a properly structured trust can preserve access to benefits while continuing to support their quality of life.
• Marriage is a major life event, but so is divorce—the statistics on failed marriages are sobering. An outright inheritance may become marital property (and possibly subject to division in a divorce) if your child commingles the funds or property with their spouse. Holding your child’s inheritance in a trust can help ensure that what you leave them remains separate and protected—and solely with your child.
• If your child becomes a parent, their financial picture and priorities will likely shift. You may need to amend your trust to reflect that change, whether by allowing distributions to support your grandchildren’s education or by changing the trust to support a long-term, multigenerational wealth strategy.
• Large estates in particular might realize tax benefits from dynasty trusts, which are designed to grow over time and provide for multiple generations, including grandchildren and great-grandchildren, for many years or even decades to come.

A Trust That Grows Up with Your Child

Sometimes being too strict with your children can backfire. The same is true of a trust: One that is too rigid may not hold up to real-life pressures and forces. Here are a few steps essential to creating and maintaining a flexible trust that can bend but not break:

• Schedule regular reviews. Revisit the trust every three to five years or after major life events such as graduation, marriage, divorce, an adverse health diagnosis, or the birth of a grandchild.
• Choose the right trustee (and backup). Choose a successor trustee who understands your family values and your child’s unique needs. As your child matures, consider whether they are ready to serve as successor co-trustee with the person you selected or as successor trustee on their own.
• Educate your child along the way. As your child matures, engage them in conversations about the trust’s purpose and mechanics to build financial literacy and ease the transition of responsibility.
• Design with adaptability in mind. Life rarely follows a script. Incorporate discretionary authority, milestone-based provisions, or amendment language so that the trust can adapt when life takes an unexpected turn.
• Work with the right professionals. An estate planning attorney may be able to update trust provisions to align them with your child’s path, wherever it takes them, and revise the trust to reflect current law, tax rules, government benefits eligibility, and wider economic circumstances depending on when the changes need to be made.

No amount of planning can anticipate everything that life might throw our way. Life does not remain static, and neither should the trust you create for your child. Circumstances change, people change, and a trust must also change to keep pace. For assistance creating or updating your estate plan to properly plan for your children, call us.