Questions for Dr. CC: What is a Minor’s Trust?

Dear Dr. CC,

What is a Minor’s Trust? Why would I use a minor’s  trust for my children?

A Minor’s Trust in general is a legal instrument drafted in order to protect assets from creditors or to protect and manage a financial asset for the benefit of a minor until they reach the age of majority.  There are several types of minor’s trusts, and we will not discuss them all here, rather let’s talk about the basic minor’s trust.

A minors trust allows you to place any inheritance that would be received by someone under the age of 18 into a trust. Funds put into a minor’s account of the proper type can be used not just for education, but for support of the child, maintenance, health and a wide variety of other purposes.

Essentially  all you have to do to establish a minor’s trust is to create an account, name an individual or institution as custodian and wait for the beneficiary to reach majority and claim the assets. Check you state of residence or, if real estate is the corpus of the trust, check the laws of the state and county where the real property lies, since laws vary on what the custodian can and cannot do and at what age (18 or 21) a minor reaches majority.

Be careful though.  These minor’s trusts instruments might seem simple on the surface, however, they can trigger unwanted outcomes if fate steps in.

For example, the custodian is a relative and not an institution like a bank.  If the custodian dies, the entire account balance is included in the custodian’s estate. If, to avoid this result, a subsequent custodian is named ( let’s say the child’s father) as custodian and dies at a time when state law imposes upon him the duty to support the child the account balance may be included in the father’s estate.

If the beneficiary dies while the account exists, you may have a probate estate, and since persons under age 18 cannot have wills, the property frequently passes (intestate) in part back to the parents or the siblings. If the siblings are minors, often you must create guardianship estates for them and be subject to court supervision and distribution for the siblings at age 18.

A Crummey Trust is a minor’s trust with a clause that creates a Crummey right of withdrawal which is designed to give the beneficiary a present interest in the trust which, in turn, allows the grantor to claim the present interest gift tax exclusion for gifts made to the trust. Unlike a Code Section 2503(c) trust, this Trust does not require that the trust property be distributed to the beneficiary at age 21.

A 2503(c) Minor’s Trust is a type of minor’s trust is named after the section of the Internal Revenue Code upon which it is based. A Section 2503 (C) trust established to hold gifts in trust for a child until the child reaches age 21 and allows for gift tax exclusions normally not allowed. Section 2503(c) sets out the conditions under which a gift of a future interest to a minor qualifies for the gift tax exclusion.

Other limitations might occur in some states, such as: Parents cannot loan money to or borrow money from these accounts; and in many states  statutes specify what the custodian may or may not invest in.

Although a more complicated option, the Crummey Trust is likey the most popular form of the Minor’s Trust. The reason is most people fear distributions being made to children, or young people having the option to take money out of trust at age 21 or earlier.

Gifting to minors is a consideration that shouldn’t be taken lightly.  As part of an overall estate plan, the ages of your children should always be considered as well as your intentions for the use of the assets you intend to give them.

The techniques discussed in this post as well as the multitude of other options in this area of estate planning can provide you with the confidence that your children or other important interests will be financially stable for a very long term.

As with all of the estate planning techniques and tools that I discuss, I caution you to seek both legal and tax counseling advice before creating these plans taking into account all the  details of your particular circumstances.  The legal and taxation concerns can be complex and  are frequently must be considered along with other overall planning requirements.

Is your elder caregiver certified?  Find out at the only registry for CertifiedCare certified care givers at


About Elder Care Advice blog

Get professional elder care giving advice, advocacy, education and tips for those who care for and about the frail elderly at the ElderCareAdvice blog. We are generously sponsored by Most posts are written by Cathleen V. Carr, unless attributed otherwise. We welcome relevant submissions. Submit your article and by-line for publishing consideration (no promises!) to Havi at, our own editor who will ensure submissions are given the best possible treatment and polish before publication, ensuring a professional level of publication. There is a nominal service fee involved ($45). Allow up to 30 days for publishing.
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