If you plan to leave assets to your children then it’s definitely a good idea to create either a testamentary trust or a living trust for them in your estate plan, especially if they are minors or possibly even if they are still young adults. It’s generally not a good idea to give even young adults access to large sums of money without any supervision. They usually don’t have the maturity to deal with it.

So which kind of trust should you consider? I believe most people think of a living trust when they think of the concept of a trust. A living trust is created and comes into existence during your lifetime. They can be useful at times, but oftentimes they are not the best choice. They are typically more expensive to set up, and they require a lot of detailed maintenance work from day one. So unless you have real estate outside of Texas, or want to give someone the power to manage your assets if you were to become mentally disabled, or think your will is very likely to be challenged, or some other good reason then there isn’t an overriding need to have a living trust. (see Do I Need A Living Trust? for more details)

So if I don’t create a living trust for my children, what kind of trust should I create for them?

If you don’t create a living trust then you can create what is called a testamentary trust that is created through a will. The trust itself doesn’t come into actual being until you die. The wording in your will dictates the terms of the trust which springs to life upon your death. So it’s much less expensive to create on the front end. And it doesn’t require any maintenance while you are still alive, because it doesn’t actually exist yet.

But just like a living trust, a testamentary trust can be worded in such a way that it helps protect the assets. For one thing, it can prevent a child from frivolously using the money while they are too young. You get to determine how long the assets are to be managed by the trustee by spelling out how old your child must be before they get full control of the remaining assets. You could make that age 25, 30, 35, whatever. At the same time you can give the trustee the authority to use assets in the trust for education and other important needs of the child.

Furthermore, the trust can be used to protect the child’s inheritance from claims of his or her creditors. Because, generally speaking, assets placed in a trust cannot be reached by a beneficiary’s creditors until those assets are actually distributed to the beneficiary.

Given how easy and inexpensive it is to set up testamentary trusts for children they are usually (but not always!) the right kind of trust for you to use for minor children or possibly even for your adult children.