How to Set Up a Trust for Minor Children

By Beverly Bird

Setting up a trust is largely a matter of making long-term decisions. When you’re establishing one for children, the implications of those decisions may reach even further into the future. The advantage to this is that your wealth can hopefully grow and compound by the time it reaches their hands. A disadvantage is that you might have to predict and accommodate the adults they will eventually become.

Step 1

Select a custodian and a trustee to take over for you when you die. If you establish a living or “inter vivos” trust, you can select yourself until that time. After that point, you’ll need a successor trustee to run your trust and oversee distribution of its assets according to the directives you’ve detailed in your trust documents. You should also appoint a custodian to financially manage the distributions made to your children and to spend them on their care if they’re still minors at the time of your death.

Step 2

Decide when and how you want your children to receive their bequests. If your son is a spendthrift and you’re leaving him a great deal of money, your trust can distribute his inheritance in increments as he grows older and more mature, such as when he reaches the ages of 25, 30 and 35. This will prevent him from going through his money all at once. If your daughter is a genius and you anticipate she’ll want to attend Yale, you can set aside funds specially for use toward her education.

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Step 3

Create your trust documents. The safest way to do this is to have an attorney draw them up so you don’t risk making legal gaffes that might complicate issues when you’re no longer alive to explain your intentions. However, you can also purchase living trust kits online, write the documents yourself and have an attorney review them after you’ve completed them.

Step 4

Fund your trust by transferring your wealth into it. If your children are still very young, you can fund your trust with long-term investments, such as stocks or savings bonds, which might be worth more after they reach the age of majority and when they receive their bequests. You won’t want to invest all your trust’s assets this way, however. It should also include available cash to pay for your children's care until they reach the ages you’ve specified for them to receive their full inheritances.

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