Three Paths, One Legacy: How to Leave Money to Your Kids

You might know what assets you intend to give your kids…but have you thought about how that inheritance should actually be passed down?

The structure you choose has a significant impact on your children’s futures. Inheritance is not simply a hand-off of assets. It’s a design choice. Here are three ways parents can leave money to their children through an estate plan.

Outright Distribution: Unintended Consequences

With this approach, your child receives their inheritance directly, with no restrictions. The primary advantage is simplicity. There are no ongoing legal structures, no trustee oversight, and no limitations on how assets are used. For some, this simplicity can be appealing.

However, simplicity comes with tradeoffs. Once assets are distributed, they lose any protection. The inheritance becomes exposed to creditors, lawsuits, financial mismanagement, and future divorcing spouses. That can feel like a leap of faith, especially when the future is impossible to predict.

Further, an outright distribution should never be made directly to a minor child. Because minors cannot legally manage assets, the court will appoint a conservator to oversee the funds until the child reaches adulthood. This process creates unnecessary costs, delays, and court supervision.

In other words, it’s simple – but simplicity comes at a cost.

Age-Based Distribution: Protection with a Deadline

This offers more structure: holding assets in trust until your child reaches a designated age. During that time, the trustee can make distributions for education, healthcare, housing, and other expenses. Once your child reaches the designated age, whatever remains in the trust is distributed outright.

This presents a middle ground. It allows for supervision while your child gains life experience, but eventually gives your child complete freedom at a certain age. That said, maturity does not always arrive according to a calendar. Some people are financially responsible at 25, while others may still struggle with money management at 35.

Also, once the trust terminates and the assets are distributed outright, the protections disappear. The inheritance becomes vulnerable to the same risks associated with an outright distribution.

Lifetime Trust Share: Long-Term Security

This is often the most strategic option. The inheritance remains in trust throughout your child’s lifetime, and the trustee uses the assets for your child’s benefit. With this, your child enjoys the highest level of asset protection, helping shield trust assets from the easy reach of creditors, lawsuits, and divorcing spouses. A lifetime trust provides a structure that adapts to evolving futures – like new careers, marriages, and unexpected financial challenges – while protecting what you’ve built.

The primary drawback is administrative complexity like separate tax filings. For many families, that extra administration is a small tradeoff for long-term protection.

Understanding the different ways assets can be passed to your children empowers you to make informed decisions and provides the confidence that your estate plan is designed exactly as you want.

At the end of the day, estate planning isn’t just about passing down assets. It’s about passing them down wisely, setting your children up for lasting success.

Leah Kofos is an attorney with the Dedham estate planning firm Samuel, Sayward & Baler LLC. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a consultation with an attorney. For more information visit ssbllc.com or call 781-461-1020.