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, choose the best schools with care, offer guidance through adolescence, support their career ambitions, and watch with pride as they build lives of their own.

That desire to be there for them goes beyond emotional and physical care. Financial security plays an equally important role, and without proper planning, even the best intentions from either you or your child can fall short.

With the future in mind, you may have already established a trust for your child early in life, knowing you would not always be there to provide financial support. Yet, just as children outgrow colorful toys, adorable clothes, and bedtime stories, they can also outgrow the terms of the inheritance you created for them years ago. A trust that served them well at age five may no longer meet their needs or protect them effectively at 25, 35, or 45 years old.

Like your child, the trust you create for them should grow and change over time. It should be a flexible, evolving legal tool that matures alongside them, from their first steps to their first job, from childhood to adulthood. You may not always be present, but with the right trust structure and thoughtful updates, your care and protection can continue for years to come.

Trusts for Minors

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?

When a minor inherits money or property outright, whether through a will or as a beneficiary on accounts like a 401(k) or life insurance policy, they typically cannot access those assets until they reach the age of majority, which in most states is 18 years. While still a minor, managing or using the inherited funds usually requires official court supervision. Unfortunately, this legal process is often far from straightforward or seamless, despite being designed to protect the child.

Here’s what happens when a minor inherits without a trust in place:

• A court usually appoints a guardian of the estate, called a conservator in some states, to manage the inherited funds. This person may not be someone you would have chosen, and they must operate under strict court supervision
• While the guardian is legally required to act in the child’s best interest, their actions are constrained by court-imposed spending limits, public reporting requirements, and annual financial accounting. What the guardian and the court define as best for your child may not align with your own wishes. Without clear, written instructions, the guardian may have no way of understanding your true intentions
• When the child reaches the age of 18 or 21, depending on state law, the full account balance, managed under court oversight, is handed over to them without any further restrictions or guidance, whether they are ready or not.
• Conservatorship (or guardianship) is a rigid and impersonal process. Even worse, it means giving up control over who manages your child’s inheritance, how those funds are used, and when your child finally receives them

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 years using staggered distributions, trustee discretion, or milestones such as completing college or reaching financial literacy goals

A trust allows you to protect your child’s future according to your wishes. You know your children best and understand that they may not be ready to manage an inheritance simply because they have turned 18. By establishing a trust and appointing a responsible person to manage their money while they mature, you can create an inheritance plan that is nearly as perfect as your child.

Trusts for Young Adults

Your child won’t remain a child forever. Being a parent means accepting their journey from childhood into adulthood, but that does not always mean handing over full control all at once.

The idea that a young person will suddenly become financially responsible at a set age, whether 18, 21, or even 25, is often unrealistic. Many young adults are still in school or just starting their careers in their early twenties. They may be managing student loans, entry-level jobs, or navigating their first serious relationships.

This period of life is one of experimentation and discovery. As you probably remember, early adulthood rarely follows a straight path. It involves detours, fresh starts, and shifting goals. Receiving a large inheritance during this time can be overwhelming and might disrupt the progress they have worked hard to achieve.

• Most young adults lack proper experience with budgeting, investing, and identifying financial red flags, whether they come in the form of peer pressure, risky ventures, or social media 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 designed to distribute assets based on age, for example, releasing 25 percent at age 21, another portion at 25, and the remainder at a later time. Alternatively, the successor trustee can be given full discretion to determine when your child is ready to receive part or all of their inheritance
• Trusts can also encourage positive behaviors by linking distributions to specific milestones, such as matching distributions to earned income to promote steady employment. They can reward accomplishments as well, like providing a lump-sum gift upon college graduation

These options let you gradually loosen control of the trust, giving your child the time they need to grow, mature, and take charge when the path ahead is steadier and clearer.

At the same time, not all young adults mature at the same rate or pursue the same goals. Some are early bloomers, while others take more time to find their way. Some may be ready to manage money responsibly in their late teens or early twenties, while others may need guidance well into their thirties. Their ambitions might include starting a business, traveling, pursuing art, entering public service, or experimenting with investing.

A flexible trust can accommodate these individual differences in personality 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
• 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
• Allow the trustmaker to create different trust structures for each of their children, taking into account their individual life paths and maturity levels

Allowing your child to gradually assume financial responsibility within the secure framework of a trust helps prepare them for full independence. It gives them the opportunity to learn, make mistakes safely, and develop into a confident and capable steward of their inheritance.

Trusts for Changing Needs and Grown-Up Responsibilities

Children not only change as they grow but also experience constantly shifting circumstances around them. A trust needs to be flexible enough to adapt to their evolving needs, new risks, and changing family roles as they transition into full adulthood.

Teenagers and young adults often require support for education, vocational training, or starting their careers. Later, as adults, they may need assistance with major expenses like buying a home or planning for retirement.

But what about financial challenges that come without warning? A trust must be designed to handle the unexpected just as effectively as the anticipated.

• 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 significant life milestone, but so is divorce, and the statistics on divorce rates are sobering. If your child combines an outright inheritance with marital assets, that inheritance could be considered marital property and subject to division in a divorce. Placing your child’s inheritance in a trust helps keep those assets separate, protected, and exclusively theirs
• If your child becomes a parent, their financial priorities will likely shift. You may want to update the trust to reflect these changes, whether by allowing distributions to support your grandchildren’s education or by adapting the trust to fit 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

Being too strict with your children can sometimes have unintended consequences. The same goes for a trust. If it’s too rigid, it may struggle to withstand real-life challenges. Here are a few key steps to creating and maintaining a flexible trust that can adapt without breaking:

• 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): Select a successor trustee who truly understands your family’s values and your child’s individual needs. As your child grows, evaluate whether they are prepared to serve alongside the chosen trustee as a co-trustee or take on the role of successor trustee independently
• 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 every challenge life may bring. Life is constantly evolving, and the trust you establish for your child should evolve as well. As circumstances and people change, the trust must adapt to stay aligned with their needs.

Looking for Expert Guidance?

If you need help creating or updating your estate plan to ensure your children’s future is properly protected, our experienced team is here to assist you. Contact us today to get personalized support and peace of mind.