If you have young children, creating a trust is one of the most thoughtful ways to protect their financial future. A trust allows you to decide how and when your assets will be used to support them, rather than leaving that decision to the court. At OC Wills & Trust Attorneys, we help California parents, grandparents, and guardians design trusts that reflect their values and goals. Whether you’re starting from scratch or updating your plan, we’ll walk you through the process step-by-step.
Why Set Up a Trust for a Minor?
Children under 18 can’t legally inherit property outright. If you leave assets to a minor without a trust, the court may need to appoint a guardian of the estate. This process can be time-consuming, costly, and restrictive. In California, the Uniform Gifts to Minors Act also requires that certain funds be held in a custodial account until the child turns 21, which may not align with your intentions.
Creating a trust puts you in control. It lets you set conditions, choose a trustee, and ensure that the money is used for what matters most—education, health, housing, or long-term financial support. You can even stagger distributions so that your child doesn’t receive everything at once.
Types of Trusts for Children
There are several ways to create a trust for a minor, depending on your preferences and long-term plans.
- Testamentary trusts are created through a will and go into effect after death. A trustee is appointed to manage the funds in the trust until the minor reaches adulthood or a specified age.
- Revocable living trusts allow you to transfer assets while you’re alive and make changes as needed. They can include terms for how your child receives money over time.
- Irrevocable trusts are designed to hold lifetime gifts and provide potential tax benefits. Some, called Section 2503(b) trusts, distribute income annually while keeping the principal in trust until a chosen age. Others, known as Section 2503(c) trusts, allow both income and principal to be used for the child’s benefit, with any remaining funds distributed outright at age 21.
We’ll help you determine which type of trust works best based on your family’s needs and the age and maturity of your children.
Family or ‘Pot’ Trusts for Multiple Children
If you have more than one minor child, a family trust, also called a pot trust, may be a good fit. Instead of creating separate trusts for each child, a pot trust gives a single trustee the flexibility to distribute funds among all children as needed. This can be especially useful when one child has higher medical or educational expenses.
The trust typically ends when the youngest child turns 18. However, this means older children may not receive their share until that time, even if they’re already adults. We’ll help you weigh the pros and cons based on your situation.
Other Trust Options for Minors
Some children may need additional protection or support when it comes to managing an inheritance. In these situations, there are other types of trusts that may be more appropriate.
- Special needs trusts are designed to provide for a disabled child without affecting their eligibility for government benefits like Medicaid or Social Security Disability. This type of trust can cover extra expenses such as transportation, therapy, or recreational activities, while public benefits continue to handle basic needs.
- Spendthrift trusts are helpful when a child may not be ready to manage money on their own, either due to age or other concerns. In this type of trust, a trustee manages the funds and has full control over when and how distributions are made. This setup helps protect the trust from misuse, creditors, or impulsive spending.
Naming a Trustee and Setting Terms
Choosing a trustee is one of the most important parts of setting up a trust. This person or institution will be responsible for managing the assets, making distributions, and following your instructions. In certain types of trusts, the trustee may also be required to submit annual accountings to the court or beneficiaries.
You decide how the money can be used, whether that’s covering tuition, health care, a first home, or starting a business. You can also choose whether your child receives their inheritance in stages or all at once. We’ll work closely with you to create terms that feel right for your family.
Tax Rules and Legal Requirements
Some trusts for minors come with tax advantages, while others require careful planning to avoid unexpected consequences. Federal gift tax limits, income tax rules, and California probate laws can all factor into your decision. We’ll help you draft a trust that’s compliant, effective, and tailored to your financial goals.
Contact Our Experienced Orange County Trusts for Minors Attorneys
At OC Wills & Trust Attorneys, we’ve helped families across Irvine, Huntington Beach, and Orange County build thoughtful estate plans that protect what matters most. If you’re thinking about how to provide for a minor child now or in the future, we’ll help you take that next step with care, clarity, and personal attention. Contact us today to start building your plan.
