Parent holding child's hand

Inheritance: Outright vs. In Trust

When you leave assets to your children in a Trust there are essentially two different ways in which they can receive them: outright or in trust. When they receive assets outright it means that the assets will be distributed to them now. When they receive the assets in Trust, it means that their assets will stay in the Trust and that it will be the job of a Trustee to manage these assets on their behalf until a later date. 

When money is held in trust to you, you will not necessarily receive the money all at once. You may receive sums of money when certain conditions are met. For example, the Trust may dictate that you are to receive half of your assets upon turning 30 or when you graduate from college. The Trust may indicate that you are to receive money when you need it but this could be some amount of money and not all of it. This would be the job of the Trustee. He or she is responsible for overseeing and managing the money in the Trust. This is why it’s so important that you select someone trustworthy and knowledgeable to be Trustee. 

Pros and Cons of Trusts for Children

A child’s Trust can be a wonderful tool because the Trustee can oversee and manage the money that you are putting in the Trust for your child. They will stay in regularly communication and plan investments and distributions depending upon the current needs. 

Another greatly benefit of setting up a Trust for your child is that Trusts are usually protected from creditors and during divorce. This is because the assets in the Trust are considered to belong to the Trust and not to a specific person (while they remain in the Trust).

Trusts for children can become more complicated when the Trustee of the Trust is one sibling while the beneficiaries include other siblings. In such a case the sibling Trustee may allow personal issues with their siblings to influence how they do the job. If not included in the Trust or if not receiving assets equal to siblings, sometimes the Trustee sibling will act out of spite, intentionally making things difficult. 

Appointing a Professional Trustee

One solution for this is to appoint a professional Trustee. Professional Trustees include corporate and private Trustees and generally are better than appointing a sibling as Trustee. Many people fail to do this because they worry that it will be expensive. However, naming a professional Trustee can prove more than cost-effective since filing a lawsuit to get rid of a bad Trustee can cost a lot of time and money. 

Biddle Law Can Help 

If you or a loved one is looking to establish or amend a Trust or any part of an estate plan, a knowledgeable and experienced California estate planning attorney who knows the current laws and has experience dealing with such subjects can help.  

At Biddle Law, we are here to answer all of your questions and walk you through the process. We care about you and your loved ones and want to help in any way we can. To learn more or to schedule a consultation, contact us today!