Setting Up a Trust for a Child in Missouri: What Parents Should Know
Most parents spend a great deal of time thinking about their children’s future – their schooling, sports, health, well being, and long term financial security. But one question many families overlook, or sometimes avoid, concerns what happens to the family’s assets if the parents pass away unexpectedly. In Missouri, a minor child cannot legally inherit or manage property in their own name. Without a proper plan in place, a Court may need to appoint a guardian or conservator to manage funds on a child’s behalf, a process that takes time, costs money, and may not align with your family’s wishes.
Setting up a Trust for a child is one of the most effective ways to protect your family and maintain control over how and when your assets are distributed. Here is what Missouri parents should know about establishing a Trust, and why working with an experienced estate planning attorney is essential.
Why a Will Alone May Not Be Enough
Many parents assume that a Will is sufficient to protect their children. A will is certainly an important document, particularly for naming a Guardian who will care for your minor children if you pass away. However, a Will has limitations when it comes to managing assets for a child over time.
Property left to a minor through a Will must go through probate – TWICE. The deceased parent will have a probate estate in order to pass an inheritance to their child – and then because a child cannot inherit money on their own behalf, a second probate case (A Conservatorship for the minor child) will be necessary to establish a person to manage the money that the child just inherited. This will likely be a lengthy and costly process.
Beyond the time and money, a Will does not allow you to control when or how your child receives their inheritance. Without a Trust, a child could gain full access to a large sum of money the moment they turn eighteen (18), which is rarely what parents intend.
A Trust, on the other hand, allows you to set specific terms regarding when distributions occur, what the funds can be used for, and who manages the assets until your child reaches the age you choose – and you can set that age to be any that you like, usually well over age eighteen (18). These are decisions that carry real consequences, and an estate planning attorney can help you think through every scenario, give advice, and tell you what other clients have done and what works.
Types of Trusts Missouri Parents Should Discuss with an Attorney
There are several types of Trust structures that may be appropriate for families with minor children, and the right choice depends on your specific circumstances, goals, and the size of your estate.
A REVOCABLE LIVING TRUST is the most common option that we see utilized. It allows you to establish the Trust immediately, retain full control of the Trust assets during your lifetime, make changes at any time, and avoid probate when you pass away, and direct the assets to your children. You can name yourself as the trustee and designate a successor trustee to step in and manage the Trust for your children if you pass away or become incapacitated.
A TESTAMENTARY TRUST is a very different way to go about planning. A Testamentary Trust is, quite simply, a Trust that is established inside of your LAST WILL AND TESTAMENT – thus the name “Testamentary Trust”. This type of a Trust is also a “Contingent Trust”, meaning that it may or may not take effect, depending on several factors. Generally, a Testamentary Trust will actually come into being only if you pass away, your spouse passes away, and your children are under a certain, specified age. While this type of Trust DOES GO THROUGH PROBATE, it at least allows you to set conditions on how and when your child receives their inheritance.
The following is an example of a fairly normal Testamentary Trust: You create a Will that states, upon your death, that your spouse receives everything; or if you have no (surviving) spouse, then your children each receive an equal share. However, if any of those children are under age 25 at that time, a Trust would be established for each such child, and a specified Trustee will hold their inheritance under certain terms and conditions.
For families with a child who has special needs, a SPECIAL NEEDS TRUST can provide financial support without disqualifying the child from government benefits such as Medicaid or Supplemental Security Income.
Each of these options involves legal and tax considerations that vary based on your family’s situation. An attorney who understands Missouri Trust law can evaluate your needs and recommend the structure that best protects your child.
Key Decisions That Require Professional Guidance
Setting up a Trust for a child involves far more than filling out a template. Several critical decisions must be made carefully, and the consequences of getting them wrong can be significant.
Choosing the right trustee is one of the most important decisions you will make. The trustee will manage your child’s assets, make investment decisions, and determine how and when distributions are handled according to the Trust terms. This person should be financially responsible, trustworthy, and willing to serve in the role for potentially many years. Your attorney can help you evaluate candidates and discuss whether naming an individual, a professional trustee, or a combination of both makes the most sense.
You will also need to determine when and how your child receives their inheritance. Many parents choose a specified age when their children will receive their inheritance “free of Trust” (meaning free of restriction), and the money is held for that child until the specified age. Other parents may choose staggered distributions, meaning giving out certain portions at certain times, such as releasing a portion at age twenty-five and the remainder at age thirty, rather than handing over everything at once. Others tie distributions to milestones like completing a degree.
Very importantly, any such distribution patterns are often accompanied by language that allows the Trustee to spend money on the child’s health, education, maintenance, and support as needed, before the child achieves the specified ages or milestones. There are many ways this can be done, and such terms must be drafted precisely to be enforceable, which is exactly why an experienced attorney’s involvement is so important.
Additionally, the Trust must be properly funded. Creating a Trust document, but then not titling your assets into the Trust (or payable on death to the Trust) is one of the most common estate planning mistakes that people make. Real estate may need to be deeded into the Trust, financial accounts may need to be titled in the name of the Trust, and beneficiary designations on life insurance policies and retirement accounts may need to be coordinated with the Trust. Your attorney can guide you through each of these steps to ensure nothing is overlooked.
Protect Your Children with the Right Legal Team
Setting up a Trust for a child is one of the most meaningful things you can do as a parent to safeguard your family’s future. The decisions involved are too important and complex to navigate without qualified legal guidance. At The Piatchek Law Firm, LLC, our estate planning attorneys work closely with Missouri families to create Trusts that reflect their unique goals, protect their children, and provide lasting peace of mind. Call us at 417-882-5858 or visit our website to schedule your complimentary consultation.
If you have questions about this issue, a estate planning attorney in Springfield, MO can help you understand the legal risks and the best path forward.
