August 25, 2017

Protecting Children’s Inheritance With Trust For Life

Written By

John P. Broadhead
Member, Stoll Keenon Ogden PLLC

When planning for transfer of assets at death, parents are faced with the question of whether to transfer assets to children outright or in trust.

Parents with young children almost always provide for transfer of assets in trust for their children, but often provide the trust is to terminate when the child beneficiary attains a certain age or ages, such as 25 or 30 years.

Parents of adult children often provide for outright transfer of assets to children unless a child has a known disability, inability to manage finances, existing creditor problems, extreme business risk, or unstable marriage.

A small but increasing percentage of parents are providing for assets to be maintained in trust for their children for the entire life of each child.  A trust provides substantial protection from loss of assets by a child because of dissolution of the child’s marriage, financial problems, and litigation claims of 3rd parties against the child arising from automobile accidents, business transactions, and professional liability.

A trust for a child’s life can include the following features that make placing the assets in the trust (and thereby obtaining the above-mentioned asset protection) almost as flexible for the child as leaving the assets outright to the child:

  1. Child can be Trustee (but even better if child is not Trustee).
  2. Child can receive income and principal from the trust for the child’s health, education, maintenance, and support in the discretion of the Trustee.
  3. Child can direct how the assets in the trust are to be distributed at the Child’s death.

The financial risks of everyday life are real.  Placing a child’s inheritance in trust for the child for the duration of the child’s life can provide substantial protection for the inherited assets while still providing more than adequate access to the assets for the child.


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