Create a Trust for Your Children in a Will

A trust created by a Will is called a testamentary trust. The trust is included as part of your Will and takes effect after your death if the circumstances described in your Will occur.

You do not create or fund a separate trust during your lifetime. Instead, your Will contains instructions directing certain property to be held in trust after your death.

The person you name to manage the trust is called the Trustee. The Trustee manages the trust property and makes distributions according to the instructions contained in your Will until the property is distributed to your children.

Understanding Your TotalLegal Trust Options

If you have minor children, TotalLegal's Last Will and Testament provides options for having property left to your children held and managed in trust until the ages you select. This guide explains how those trust options work, what happens to property while it is held in trust, and what the different distribution ages mean.

TotalLegal's current Will interview provides these trust options when you have at least one minor child. The interview does not currently provide the same trust options when all children are adults or for other beneficiaries.

Keep in mind that a child's age may affect other portions of the Will in addition to the trust provisions, including language concerning guardians, minor beneficiaries, and the distribution of property that may not apply to an adult child. The Will is generated automatically based on the answers selected in the interview, and different answers may cause certain language to be added, changed, or omitted. For that reason, we do not recommend relying on manual edits to the completed Will to account for changes that would otherwise affect how the document is generated.

With TotalLegal, you can choose to leave property to your children outright, use a Pot Trust, or use a Pot Trust followed by separate trusts. The major difference between the options is when your children receive control of their inheritance and whether their shares remain together or are divided into separate trusts.

Option 1: Leave the Inheritance to Your Children Outright

The simplest option is to leave the inheritance to your children without creating a continuing trust for them.

With an outright distribution, each child's share is distributed to that child rather than being held in a continuing trust until ages you select.

If a beneficiary is too young or is otherwise legally unable to receive property directly when a distribution is required, your Will includes provisions allowing the property to be handled in another manner permitted by the Will and applicable law.

Option 2: Use a Pot Trust

A Pot Trust keeps property for your children together in a single trust rather than immediately dividing it into separate shares for each child. It is sometimes also referred to as a family trust. The Trustee manages the Pot Trust for the benefit of the children. While the trust continues, the Trustee may use trust property for the beneficiaries as provided in your Will.

One reason a Pot Trust is different from immediately dividing an inheritance equally among children is that the Trustee can consider the children's individual needs while the property remains together. One child may need more from the trust than another during a particular period.

When creating the Pot Trust, you select an age for the youngest child. That age determines how long the children's inheritance will remain together in the Pot Trust. When the youngest child reaches the age you selected, the Pot Trust ends and the remaining trust property is distributed as provided in your Will.

Option 3: Use a Pot Trust Followed by Separate Trusts

This option provides the greatest amount of control over when your children receive their inheritance. It begins with a Pot Trust, just like the previous option. The children's inheritance remains together and is managed by the Trustee until the youngest child reaches the age you select.

Instead of distributing the remaining property outright when the Pot Trust ends, however, the property is divided into separate shares. A separate trust is then created for each child, and each child's inheritance can be distributed over time at the ages you select.

What Do the Four Age Choices Mean?

If you select the Pot Trust followed by separate trusts, TotalLegal asks you to choose four ages. These ages serve two different purposes.

Age 1: The first age determines when the Pot Trust ends. The Pot Trust continues until the youngest child reaches this age. At that point, the remaining property is divided into separate trusts for the children.

Ages 2, 3 and 4: These ages determine when portions of each child's separate trust are distributed to that child. Instead of receiving the entire inheritance at once, the child receives it in stages.

Example:

Suppose you select ages 25, 30, 35 and 40. The children's inheritance would first remain together in the Pot Trust until the youngest child reaches age 25. At that point, the Pot Trust would end and the remaining property would be divided into separate trusts for the children.

Each child's separate trust would then provide for distributions at ages 30, 35 and 40 according to the terms of the Will. The final distribution ends that child's trust. This means the first age is different from the other three. It controls the transition from one shared Pot Trust to separate trusts. The remaining three ages control the staged distributions from those separate trusts.

What Happens While Property Is in Trust?

While property remains in trust, the Trustee manages and invests the trust property and may make distributions for a beneficiary as authorized by the Will. Choosing a later distribution age does not necessarily mean that the inheritance simply sits untouched until the child reaches that age. The trust provisions give the Trustee discretion to use trust income or principal for the beneficiary's needs and other purposes described in the Will.

The distribution ages generally determine when a child receives control of portions of the trust property. Before then, the Trustee controls and manages property that remains in trust.

What Is the Difference Between a Trustee and a Guardian?

A Trustee and a guardian have different responsibilities. The same person may be named as both guardian and Trustee, or you may choose different people for the two roles.

A guardian is the person nominated in your Will to care for your minor children if a guardian is needed after your death. The guardian is concerned primarily with the child's care and upbringing.

A Trustee manages property held in trust for your children. The Trustee is responsible for managing the trust property and making distributions according to the terms of your Will.

Choosing a Trustee

Because a trust may continue for many years, the person you choose as Trustee can have significant responsibilities. Consider whether the person is someone you trust to manage property, keep appropriate records and make decisions concerning distributions to your children.

Your Will can also name a successor Trustee to serve if your first choice is unable or unwilling to act.

What Is Spendthrift Protection?

The trusts created by your TotalLegal Will include spendthrift provisions. A spendthrift provision generally restricts a beneficiary from transferring an interest in trust property before it is distributed and can provide protection from creditor claims to the extent permitted by applicable law. Once property is distributed from the trust to a beneficiary, it is no longer being held and managed as trust property.

Which Option Is Best?

The primary questions to consider when completing this portion of your TotalLegal Will are whether you want inherited property to remain under the management of a Trustee, how long you want the children's property kept together, and whether you want each child to receive the remaining inheritance at once or in stages over time. TotalLegal cannot tell you which option is best for your family, but understanding the practical differences can make the choices easier to evaluate.

Outright distribution: The child's inheritance is not placed in a continuing trust with distribution ages selected by you.

Pot Trust: The children's inheritance remains together in one trust until the youngest child reaches the age you select.

Pot Trust followed by separate trusts: The inheritance initially remains together in a Pot Trust. When the youngest child reaches the first age you select, the property is divided into separate trusts. Each child's remaining inheritance is then distributed in stages at the additional ages you select.

Review Your Trust Choices

Your completed Will will contain the trust provisions created from the choices you make during the TotalLegal interview. Review the completed Will carefully before signing to make sure your selections accurately reflect your wishes.