All about Age

There are lots of little ins and outs of trust formation, most of which you’ll never have to deal with. (That’s why we’re here!)

One thing we can’t decide for you, though, is the age at which you want your beneficiaries to receive their trusts. This is something you’ll have to consider for yourself, so let’s talk through the legal age requirements for trusts in California.

There are two main “threshold” ages to be aware of: 18 and 25.

Let’s talk about the age 18 threshold first.

If you want to leave any assets worth over $5,000 to anyone under the age of 18, you’ll have to designate that those assets be managed by a trustee.

If you don’t do this (for instance, if you decide not to have a trust), then your assets will go through a probate court proceeding, and the court will appoint a guardian to manage those assets, or hold them in a custodial account for those beneficiaries and give it to them when they’re 18. The probate court judge will decide what’s appropriate and whether any court-appointed guardians will need to file regular reports to the judge.

Now, let’s say that you do have your assets in trust, but you feel like 18 is too young for your beneficiaries to be able to access them. California law says that you can say so under your trust, and have the assets held in a custodial account for that person until they turn 25. In this case there will still be a custodian responsible for managing the account for that beneficiary. You can name who you would like to serve as custodian, or allow your trust manager to choose a custodian if that beneficiary is in fact under age 18 at your death.

Now let’s talk about what happens at age 25.

A custodial account set up for a beneficiary will terminate when the beneficiary reaches age 25, and the beneficiary will have full control of the assets. But let’s say that you feel like 25 is still too young, and you want to set up your trust so that your trust manager or another person manages your beneficiaries’ assets even after they turn 25. You can accomplish this by directing your trust manager to hold the beneficiary’s assets in an irrevocable trust (instead of a custodian account).

You will write the rules of how these irrevocable trusts will be managed under your revocable trust agreement. Prior to your death, you can add to and change any of the rules for these irrevocable trusts. After your death, the trust manager of the irrevocable trust must follow the rules you wrote and the beneficiaries cannot change the rules.

You have a lot of flexibility on how you want to write the rules, including at what age your beneficiary will receive all of the trust assets. That age can be basically whatever you want, and you can even state that you want your beneficiaries’ assets to remain in trust indefinitely because of the protections this type of trust can provide.

How do you know what age limits to set in your trust?

This is a personal decision, but most people tend to consider four factors:

#1. Maturity of the beneficiary.

People change and grow, but you may know that you want to give one of your children a little more time to mature before they’re able to access their assets, or you may never feel fully comfortable letting your beneficiaries manage their own finances. While this factor does involve some guesswork, we encourage you to listen to your intuition — you know, deep down, what you’re comfortable with.

#2. Concern about other people taking advantage.

An unfortunate truth about inheritances is that sometimes people will try to take advantage. If you’re worried about people approaching your beneficiary for handouts, or if you don’t want them to have to navigate the interpersonal dynamics that can come out of receiving an inheritance, a trust can form a nice buffer.

#3. The presence of a network of support.

If you do decide to keep your beneficiaries’ assets in trust, you’ll need to appoint at least one person to manage those assets for them. Consider whether you have a network of trusted adults who are willing to take this task on. You may also want to think about, or ask them directly, how long they’d be willing to do this task. After all, managing someone else’s finances indefinitely is quite the ask.

#4. The value of the trust assets.

Finally, consider the value of the assets in question. If you’re leaving your beneficiaries a relatively small trust, then it might not be worth it to keep the assets in trust for a long time. (Remember, there are expenses associated with maintaining a trust, and there’s no point in having a trust that just pays for itself and drains your assets.) If you have a larger amount of assets to give them, though, keeping them in trust longer may make sense.

Ultimately, there’s no right or wrong way to do this. Consider all the factors, listen to your gut, and go from there.

And remember, we’re always here to help! Contact us at hello@trustduet.com at any time.