Young clients want to keep things simple. Millennials don’t want their parents’ heirloom brown furniture or the antique rugs. They want their lives portable. They want to be able to move easily without a lot of fuss. They like jewelry, art and cash. And when it comes to estate planning, they often want a simple will. A simple will may work for them if they are just married and under the estate tax threshold. However, when they have children of their own, they need a trust.



Without a trust, minor children inherit assets outright when they turn 18. Any estate planning attorney can provide you with horror stories of clients who inherited monies at a young age with bad results. At age 18, a $4 million inheritance looks like it will last a lifetime. And it could if the beneficiary lives within his means, doesn’t invade principal and has a job to help support his lifestyle and supplement his income. The harsh reality is that kids can become lost. I remember a beneficiary who I met in his 20’s right after he inherited a large chunk of money outright from his grandparents. He had fits and starts at college, never had a job, lived well beyond his means, and at age 40 ran out of money. And did I mention he developed a drug addiction along the way?

Then there are the kids who just bide their time waiting for their inheritance. I had another client who had the money spent before she inherited it. She built a house with every custom item she could find, and took two-week cruises a few times a year. The money eventually ran out and she was forced to get a full-time clerical job. As the saying goes, isn’t it better to live like a prince for a lifetime instead of a king for a day? A trustee can ensure that your kids and young adult children are taken care of over the long haul.

Kids need support, guidelines and boundaries, which is what good parents do. If you are not around to provide that direction, a trust can create those boundaries around their finances. The trustee can work with your children to develop an income flow that will meet their needs and preserve their trust principal. The trustee can also teach your kids financial literacy so they have the skills if and when they are given more responsibility for their inherited assets.

This is not just relevant for minor kids who are under 18 years old. Adolescence has definitely extended well beyond age 18. In most states, children have legal authority to make their own decisions at age 18; however, just because a child is “legal” in the eyes of the law, that does not mean he or she is responsible enough to invest a $10 million inheritance. It makes sense to put experienced advisors in charge of managing the assets along the way.

There are mechanisms that you can put in place through a trust  to help your children become financially responsible with their inheritance. For instance, when they are old enough, you can establish that they will become a co-trustee. That enables them to have a seat at the table with the trustee and make decisions about the management of the trust assets. Another option is to give them access to large distributions of principal slowly over time so they get used to managing the money. If they receive a large distribution and blow it at a Las Vegas roulette table, they have another chance to do something more prudent with the funds with the next distribution. Of course, if they are likely not going to learn from their mistakes, then holding the money in trust for their lifetimes is always a viable solution.

Simple solutions can often work, and there are definitely times when a simple will is appropriate. However, when you have minor children, letting them inherit money at age 18 is not a good idea. Is it possible they will develop the skills they need to successfully manage the assets and live a productive life? Yes, it is possible. But why take that risk? Help them along the way by providing guidance and stability through a trust.

This article was written by Christine Fletcher from Forbes and was legally licensed by AdvisorStream through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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Simon Marples, CAIB
Corporate Wealth Advisor
CanTrust Financial Services Inc.
Office : 604-664-8900
Mobile : 604-307-1200