A comprehensive estate plan protects your assets and provides for your minor children. With a will, you can name guardians and establish testamentary trusts for them. You can also provide for your children by creating standalone trusts for minors. That’s where OC Wills & Trust Attorneys come in.
Our legal team has extensive experience preparing irrevocable trusts, including trusts for minors. We know that nothing is more important to you than your children and will help you create an estate plan that protects their well-being.
Above all, we will provide you with trustworthy advice, objective insights, and the personal attention you deserve. Contact our office today to get started with our experienced wills and trust attorney. We serve clients in Irvine, Huntington Beach, and Orange County, California.
Creating Trusts With A Will
A will determines the distribution of your assets after you die, appoints an executor to carry out your instructions, and designates beneficiaries to receive the estate assets. With a will, you can also name a guardian to care for your minor children.
Because children under 18 cannot directly inherit property, you can establish a testamentary trust within your will to provide for them. Notably, California follows the Uniform Gifts to Minors Act, which means the child’s money must be placed in a custodial account for their benefit until they turn 21.
Also, the guardian is subject to court oversight. There are strict rules governing the use of funds in a testamentary trust. Finally, a will must go through probate, causing unnecessary delays in accessing money to provide for minor beneficiaries. For this reason, many estate planners choose to establish standalone trusts for minors.
California Trusts for Minors
Under federal tax law, it is possible to create irrevocable trusts for minors, known as Section 2503 Trusts. The trust proceeds can be used for the child’s health, education, maintenance, and support. The appointed trustee is responsible for managing the trust for the benefit of the children. The trustee must provide an annual accounting to the court, confirming that trust proceeds have gone for their intended purpose.
Generally, there are two types of irrevocable trusts for minors – Section 2503(b) and Section 2503(c) trust (named after the applicable sections of the Internal Revenue Code):
Section 2503(b) Trust
Trust income is distributed to the beneficiary annually or transferred to a custodial account if the child is under 18 and managed by the trustee. A child between 18 and 21 has the right to withdraw money from the trust equal to the annual gift tax exclusion (currently $15,000 per year). Finally, the trust can continue after the child reaches 21. In this arrangement, the principal remains in the trust until the child reaches a specific age.
Section 2503(c) Trust
The principal and income in a Section 2503(c) trust can be used for the child until they reach the age of 21. For example, the trustee can pay the child’s college expenses from the trust proceeds. The remaining proceeds will be disbursed to the child when they reach 21. Notably, a 2503(c) trust is better suited for a child who will be mature enough at 21 to handle money responsibly.
What Is a Family or ‘Pot’ Trust?
Some families with minor children establish one trust covering them all in an arrangement called a pot or family trust. A pot trust can be set up in a will or separately as a revocable living trust. The trustee is authorized to distribute trust proceeds to each child and has the discretion to determine what each child needs. A pot trust terminates when the youngest child reaches age 18. However, the older children cannot receive their shares of the trust until the youngest child turns 18, so they may not gain control over their inheritance until well into adulthood.
Other Trusts For Minors
There are other trusts for minors for specific circumstances, such as providing for a disabled child or one who is incapable of handling an inheritance:
- A special needs or supplemental trust sets aside funds for a disabled child while maintaining their eligibility for public health and disability benefits, such as Medicaid and Social Security Disability. The trust assets supplement the beneficiary’s day-to-day expenses.
- A spendthrift trust protects a minor beneficiary from frivolous spending by appointing a trustee to manage the trust. The trustee has complete authority to distribute proceeds to the beneficiary or use funds to cover their expenses.
Contact Our Experienced California Trusts for Minors Attorneys
At OC Wills & Trust Attorneys, we know that you are ultimately concerned for the well-being of your children. By establishing an irrevocable trust, you can rest easy knowing that their needs will be met when you are not there to care for them. Contact us today to learn how we can help.
