Protection for Minors
Legally, children under the age of 18 cannot inherit large sums of money (and if you have a life insurance policy, then you have “large sums of money” to pass on to your child!).
If a parent dies and leaves this money directly to a minor child, the court will step in and appoint a guardian to manage your child’s money — and there’s no guarantee this guardian will be a trusted friend or relative. A trust will prevent your child from having to grow up with this added level of bureaucracy, and will give you more control over how the money is managed and spent.
When you create a trust for a minor child, you can specify whom the trustee will be as well as your instructions for how your child will inherit. For example, instead of having your child come into his or her inheritance all at once, you may consider it a better plan to distribute the wealth gradually. You can still earmark funds to pay for education, medical expenses, etc., before they even reach the age of distribution – which, again, you can specify.
Establishing a trust for minor children also ensures that their inheritance is protected in case your spouse remarries.