One of the decisions parents make when creating an estate plan is the age at which their children will receive their inheritance outright. The minimum age in CA to avoid probate court is eighteen, the maximum depends on circumstances. Until that age, the inheritance remains in a trust and is managed by a trustee.
When making this decision, many parents ask a similar question:
“If my child does not receive the inheritance outright until age 30, does that mean they get no money until age 30?”
No, that is not how most trusts work at all.
Most trusts routinely allow the trustee to use trust assets for the beneficiary’s health, education, maintenance, and support (“HEMS”). In plain English, that means the trustee can use trust funds to help pay for many of the ordinary expenses of life.
Depending on the circumstances, that may include housing, rent, tuition, books, medical expenses, transportation, insurance, and other reasonable living expenses.
The trustee’s job is not to lock up the money and refuse to spend it. Instead, the trustee’s job is to manage the money for the beneficiary’s benefit using adult judgment about spending decisions.
For example, suppose your 22-year-old child wants a new car, and has inherited $2,500,000.
If the $2,500,000 inheritance is in a trust, the child needs to go to the trustee. If the trustee agrees that the child indeed needs a new car, they will buy a reliable Toyota.
If the $2,500,000 inheritance was distributed to your child outright, and they want a new car, they can buy a Ferrari.
In both situations, the result is the same: your child still gets a car, so the choice is not between “my child gets money” and “my child gets nothing.” Instead, the choice in outright distribution vs. distribution in trust is between giving a young adult complete control over a substantial inheritance or placing someone you trust in charge of managing that inheritance until the age you selected.
There is no universally correct age for an outright distribution. The right answer depends on your child, the amount of money involved, your family circumstances, and your goals for the inheritance. That is one of the many decisions you will discuss with your estate planning attorney when creating your estate plan.
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