Leaving an inheritance for a minor child takes more than good intentions. You probably already know that a minor can’t legally manage money, but the solution isn’t always obvious.
Whether you’re planning for your own child or a grandchild, you need a structure that allows an adult to step in, manage the funds, and protect the child’s interests both now and in the future.
And if you’re already thinking about estate planning, there’s a solution that can cover much more than just this issue. It’s called a revocable living trust, and it’s often the best place to start.
A Living Trust Can Grow With Your Family
A living trust gives you a way to keep your estate plan flexible. You can add or remove beneficiaries, update instructions, and shift your strategy as your life changes.
When you create the trust, you choose someone to step in as the trustee and manage the assets for your child. You can also say when the child will receive the money outright. Some parents allow access at 25, 30, or even later. You’re in control of the timing and the terms.
As your child matures, you can adjust those terms. If your goals change, you can modify the trust. And if you have more children, you can include them too. A living trust isn’t locked in forever. It’s designed to adapt as your life evolves.
What If You’re Only Creating a Will?
If you’re not ready to set up a full trust now, there’s still a way to keep some control. You can include a testamentary trust in your will.
This type of trust doesn’t exist until after you pass away, but it works in a similar way once it’s created. The court will follow your instructions and appoint the trustee you named to oversee the funds.
This gives you more structure than simply naming the child in your will. Without a trust, the court would appoint a guardian to manage the money until the child turns 18.
After that, the child receives the entire inheritance in one lump sum. If you don’t like the idea of an 18-year-old handling a large amount of money without oversight, a trust is a better option.
Consider Naming a Trust as Life Insurance Beneficiary
Many people name a child directly as the beneficiary of a life insurance policy. It seems like the right thing to do, but it creates a problem.
Just like with a will, a child can’t receive that money directly. The court will intercede to appoint someone to manage the funds, and that takes time, paperwork, and often legal fees.
Instead, you can name your trust as the beneficiary. That way, the life insurance payout goes directly into the trust and is managed under your terms. The trustee you selected will follow your instructions, and the child won’t have access until the time is right.
This approach keeps things simple, private, and under your control. It also helps avoid the delays and court involvement that often come with leaving money to a minor through other means.
What About UTMA Accounts?
If you’re looking for something more basic, you might come across the idea of a UTMA account, which is a custodial account created under the Uniform Transfers to Minors Act. This lets you name a custodian to manage the money until the child reaches a certain age, usually 18 or 21.
It’s a decent option for small inheritances or gifts, and it avoids court involvement. But once the child reaches the age of termination, the money is theirs. No strings attached, no oversight, and no conditions.
You can’t set staggered distributions or require the money to be used for college. If you’re concerned about how the funds will be handled, a trust gives you far more control.
Need a Phoenix or Tucson, AZ Estate Planning Lawyer?
We can help if you would like to work with an attorney to put a plan in place, and we cover all parts of the great state of Arizona. You can send us a message to request a consultation appointment, and we can be reached by phone at 888-222-1328.
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