Critter Corner: Should We Leave Our Money to Our Children Outright?

Dear Magic,

My wife and I are planning to do our estate planning soon. We want to leave our money, property and valuables to our children. They are teenagers now. What’s the best way to do so? Should we leave our money to our children outright or is a trust a better option?

Thanks for your help!

Lee Vinitoothem

Dear Lee,

You have made a good decision to get your estate planning in order. Your question is one that is contemplated by many with children when embarking on their estate planning.

For the reasons listed below, it may not be a good idea for minor children or even young adults to inherit property outright:

Reaching a particular age doesn’t mean someone is financially mature enough to make sound fiscal decisions.
Someone with more maturity and experience needs to manage the assets and make spending decisions.
Some people are spendthrifts no matter what their age. To help protect them from squandering their money, you can set rules for distributions from the trust.
As the value of an inheritance increases, so does the level of financial acumen needed to manage it. The adult child could hire a money manager or financial advisor to manage wealth inherited outright. But someone who isn’t sophisticated enough to manage the money might not make the decision to hire a financial advisor.
When you leave an inheritance outright to an adult child, the spouse of your offspring often can claim a share of the assets in a divorce or separation, or at least heavily influence what your child does with the inheritance. But when you leave the inheritance in a trust, it’s less subject to influence from a spouse; it won’t be considered part of the marital estate; and it won’t end up with a former spouse of one of your children.

A Trust is a Prudent Way to Leave an Inheritance to your Children

Setting up a trust will protect your children from some of the things listed above. Here’s why:

With a trust, you can give the trustee discretion to determine the distributions based on the needs and best interests of the beneficiary.
If you’re really concerned about the spending of the child, the trustee can pay the expenses of the child directly to providers of essential living expenses instead of distributing cash or property directly to the child.
If you are worried that an adult child has a problem with substance abuse or gambling, a trust is also a wise idea. In this case, you can give the trustee the discretion to stop making distributions when it is in the beneficiary’s best interests. Distributions can be resumed when the trustee determines it is again in the beneficiary’s best interests.
A trust also protects your wealth from the creditors of the children. In most states, creditors can’t force distributions from a trust, but they can assert claims against income and principal that are distributed to the children.

Remember, when an inheritance is given through a trust instead of directly, it doesn’t have to stay in the trust forever. You can provide that the principal will be distributed to the beneficiary upon reaching a certain age, or that it will be distributed in stages as the beneficiary reaches different ages. Some trusts, often called “incentive trusts,” make distributions as other milestones are reached, such as buying a first home, getting married, paying for a new(er) car every 10 years, and anything else that you, the trust creator, deems appropriate.

Hop this is helpful,



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About Renee Eder

Renee Eder is the Director of Public Relations for the Farr Law Firm, and gives the voice to the Critters of Critter Corner. Renee’s poodle, Penny, is an official comfort dog who she and her children bring to visit with seniors who are in the early stages of dementia at a local senior home once a month.

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