CA Trusts Guide: Kids Estate Planning

Short answer: A trust lets you pick who manages your child’s inheritance and when your child gets it. A minor can’t take control of an inheritance. Once a child’s total estate goes over $5,000, a parent can’t hold it informally (Prob. Code §3401), and a court may appoint a guardian of the estate, block the money in an account, or hand it to a custodian who must turn it over by age 18 to 25 (Prob. Code §§3413, 3920, 3920.5). A funded living trust keeps the court out and sets the ages you choose.

Most parents think of a will when they think of planning for their kids. A will names a guardian, which matters. It doesn’t manage money well for a child, and it doesn’t keep that money out of court. A trust does both.

Law verified against Probate Code §§1500, 1501, 2620, 3401, 3413, 3920, 3920.5, 15681, 16061.7, 16061.8, and 16062, Family Code §6500, and 20 C.F.R. §§416.1201 and 416.1205, 2026. This is general information, not legal advice for your situation.

What happens to a child’s inheritance without a trust?

In California, anyone under 18 is a minor (Fam. Code §6500), and a minor can’t manage an inheritance alone. If you leave money to your child in a will, the will has to go through probate first. Probate starts with a petition asking the court to admit the will and appoint a personal representative (Prob. Code §8000), and my firm’s working estimate for a California probate is twelve to eighteen months. The California Courts Self-Help Guide puts it at about nine months to a year and a half.

• Small amounts. If the child’s total estate, including the new money, doesn’t exceed $5,000, it can be paid to a parent with custody, who holds it in trust until the child reaches majority. The parent has to give a verified written assurance that the total is under $5,000 (Prob. Code §3401).
• Larger amounts. For money belonging to a minor with no guardian of the estate, the court may appoint a guardian of the estate, order the money into a blocked account withdrawable only with court authorization, or transfer it to a custodian under the California Uniform Transfers to Minors Act (Prob. Code §3413).

A guardian of the estate has to account to the court one year after appointment and at least every two years after that (Prob. Code §2620). Every one of those accountings is a court filing, usually with a lawyer’s help, paid for from your child’s money.

And when the child comes of age, the protection ends. A UTMA custodian must turn the property over when the child turns 18, unless the transfer was set up to delay delivery (Prob. Code §3920). A will or trust can push that date back, but no later than age 25 (Prob. Code §3920.5(c)). After that, your child has everything, outright, whether ready or not.

How does a trust for your children work?

You create a revocable living trust, serve as your own trustee while you’re alive, and name a successor trustee to take over at your death or incapacity. The trust document tells the successor trustee what to do with each child’s share:

• Who manages the money? A family member, a trusted friend, or a professional fiduciary, with at least one backup. If the trust doesn’t set the trustee’s pay, the trustee is entitled to reasonable compensation (Prob. Code §15681).
• What can the money pay for before final distribution? Most parents use a health, education, maintenance, and support standard. I explain how trustees apply it in what HEMS means in a trust.
• When does your child get money outright? Many parents stagger it, such as one-third at 25, one-third at 30, and the rest at 35. If the first distribution is spent badly, most of the inheritance is still protected. You can also tie a distribution to finishing a degree.
• Who takes if your child dies first? Name contingent beneficiaries so the share goes where you intend.

For a deeper look at control and timing, see who controls a minor’s inheritance, and when do they get it.

What does the trustee owe your children after you die?

When a revocable trust becomes irrevocable because a settlor dies, the successor trustee must serve a notification on each beneficiary and each heir of the deceased settlor (Prob. Code §16061.7(a)(1), (b)), no later than 60 days after the death (Prob. Code §16061.7(f)). A person served with that notice generally can’t bring a trust contest more than 120 days after service, or 60 days after a copy of the trust terms is delivered during that 120-day window, whichever is later (Prob. Code §16061.8).

The trustee must also account at least annually to each beneficiary to whom income or principal is required or authorized to be distributed (Prob. Code §16062(a)). The steps a successor trustee follows are on my trust administration page.

Do you still need to name a guardian?

Yes. The trust covers the money. A guardian covers the child. A parent may nominate a guardian of the person, the estate, or both, for a minor child (Prob. Code §1500), and a parent or anyone else may nominate a guardian for property the child receives from that person, including by trust, will, or insurance (Prob. Code §1501). Name the guardian in your will, and name the trustee in your trust. They can be the same person or different people. Some families prefer to split the jobs so one person raises the child and another handles the money. See naming a guardian for your children in California.

How do you protect a child with a disability?

If your child receives SSI, an outright inheritance can end eligibility. The SSI resource limit for an individual has been $2,000 since January 1, 1989 (20 C.F.R. §416.1205(c)). A resource is cash or property the person owns and could convert to cash for support, and property the person has no power to liquidate isn’t counted as that person’s resource (20 C.F.R. §416.1201(a)(1)).

A third-party special needs trust, funded with your money and giving the trustee sole discretion over distributions, is built on that rule. Your child can’t force a distribution, so the trust assets aren’t your child’s resource, and the trustee can pay for things public benefits don’t cover. The drafting details matter, and Medi-Cal applies its own eligibility rules. My special needs trusts page covers the planning.

How do you set it up and fund it?

A trust controls only what it owns. Planning is done by phone and Zoom, and a mobile notary comes to you to sign. I record the deed moving your house into the trust. You get a map for re-registering each bank and brokerage account in the trust’s name, and for naming the trust as beneficiary of life insurance and similar accounts so that money flows into the same structure for your children. More on the overall plan is on my living trust attorney page.

What does a trust for your children cost?

My flat fee for a complete trust-based estate plan, including a revocable living trust, pour-over will, and incapacity documents, is $4,900. That fee covers the children’s trust provisions and guardian nominations. Compare that with a guardianship of the estate that requires a court accounting every one to two years until your child turns 18.

Is a UTMA account enough?

For a modest gift, sometimes. A custodianship under the California Uniform Transfers to Minors Act is simpler than a trust, and a will or trust can name the custodian and delay delivery to as late as 25 (Prob. Code §§3905, 3920.5(c)). But the child gets everything at the cutoff age, with no staggering and no way to protect a child on public benefits. For the bulk of what you leave, a trust gives you the control a custodianship can’t. The broader plan is on my estate planning page, and I cover what young parents need first in estate planning for parents.