Leaving an Inheritance for Children – What You Need to Know

It’s important for parents to plan not just who will take care of their kids if they pass away, but also who will manage any money or property the children inherit.

If your children are still young when they inherit from you, someone needs to look after those assets until the kids are old enough.
 

What Happens if You Don't Plan

If you don’t say who should manage your children’s inheritance, a court will do it for you. The court appoints a “property guardian” to oversee the assets until your child turns 18. This is often the other parent, but not always.

Court-appointed guardians must make regular reports and don’t have much freedom in how they manage the property. For small amounts of money, the law sometimes allows a simpler arrangement called a custodian.

If your kids are 18 or older when they inherit, they get control of the money or property right away—unless you make a different plan in your will or trust.
 

How You Can Manage Your Children's Inheritance

You can set up someone to look after your children's inheritance in a few ways:

1. Name a Property Guardian in Your Will

You can name a property guardian in your will. If your child needs this guardian because they are still young when you pass away, the court will typically appoint the person you chose.

This person manages whatever your child inherits, unless you’ve set up another system (like a trust).

2. Name a Custodian (Uniform Transfers to Minors Act)

Almost every state has a law called the Uniform Transfers to Minors Act (UTMA). This lets you name a “custodian” to manage money or property for your child until a set age (usually 21, sometimes 18 or 25).

You can do this in your will, trust, or even on life insurance policies. For example, your will might say, “I leave $10,000 to Michael Stein, as custodian for Ashley Farben under the Illinois Uniform Transfers to Minors Act.”

When your child reaches the age set by law, they get full control of the inheritance.

Using Life Insurance for Children

If you want to use life insurance to leave money to kids, you can name a custodian or create a trust to manage the funds. Make sure to think carefully about what type of life insurance you really need.

3. Set Up a Trust for Each Child

A trust lets you pick a trustee (usually someone you know and trust) to handle your child’s inheritance until they reach a certain age you choose.

Trustees use the money for the child’s health, education, and living expenses. When the child reaches the chosen age, they get whatever’s left in the trust.

Trustees have to file taxes for the trust and may need to show banks or others proof of their authority. Managing a trust is more work compared to a custodianship, but it gives you more control over when and how your child gets the money.

Delaying a Child's Inheritance

If your child might inherit a large amount, you may want to hold off on giving them full control at age 18. One way is to give the money in parts—for example, after college graduation, at age 25, and at age 30.

The trustee can still use the money to help pay for things like school and medical bills.

4. Set Up a “Pot Trust” for Multiple Kids

Instead of one trust per child, you can set up a single trust (sometimes called a “pot” or “family trust”) for all your kids. A trustee decides how much money each child gets based on their needs.

This trust usually ends when the youngest child hits a certain age (often 18), and each child gets their share. The main downside is that older kids might have to wait until the youngest turns 18 before getting their inheritance.

Picking the Right Age for Your Child to Inherit

Think about how much money your child will get and how mature they are. Not all teenagers or young adults know how to handle big amounts of money.

Some parents set up trusts so their kids don’t get all their inheritance until they are older. However, making kids wait too long can cause frustration, and maintaining trust for many years can be expensive.

At some point, you need to allow your adult child to manage their own inheritance.
 

Next Steps

If you’re ready to set up your will or a trust, you can use tools like Nolo’s Quicken Willmaker & Trust, which provides forms to help you protect your family and save legal costs.

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