Contingent Trusts for Minor Children

The general consensus is that parents with minor children (under 18) should have some form of estate planning in place.  This is often in the form of a Simple Will which has a provision nominating a Guardian who will physically care for the minor children if both parents die.  Additionally, it is important to know that minor children cannot inherit property outright in Minnesota.  Without proper estate planning, court proceedings will be necessary to appoint a conservator to manage your property for your child until the child reaches 18 years old.  Therefore, another common facet to estate planning for parents is the creation of a Contingent Trust.  This Trust is usually written right into the parent's Will.  

In a Contingent Trust situation, the Will has a provision providing that if both spouses are dead (or if the single parent dies), then the property passes into the Contingent Trust (rather than outright to the minor children) to be administered according to the terms of the trust.  The Will also names a Trustee to administer the trust and carry out the terms of the trust.  The trust comes into effect at your death and "pops out" of the Will.  Contingent Trusts are very flexible and can be heavily customized to suit the parents' wishes for how they want property distributed to the children.  I have talked about one form of this trust before: the Pot Trust.  

Contingent Trusts give parents a lot of control over the property post-death.  Parents can specify at what ages they wish the children to inherit the property or perhaps distribution in installments.  Many parents do not want their children to come into their full inheritance upon reaching 18 years old for a variety of reasons.  For example, how responsible with money were you at age 18?  The trust can also specify particular uses for the property before full distribution, such as education expenses, health care, down payments on houses, starting a business, etc.  Another important aspect to theses trusts is that the money in the trust is protected from creditors of the children - at least until the money is distributed to the child.

These are just some of the benefits of a Contingent Trust.  They can be affordable to set up and the long-term benefits outweigh the up front cost.  Speak with an estate planning attorney to see whether a Contingent Trust makes sense for your particular circumstances.