Often I am asked how a living trust protects the inheritance of minor children of divorced or separated parents. Let's go over some general principals. If a custodial parent dies, what will happen to his or her minor child's inheritance from that parent? First, the probate court will have to name a guardian to take over the care of that minor child. The noncustodial natural parent is typically named as the guardian unless a showing can be made that the noncustodial parent is unfit or unable to care for that minor child's needs. Under the situation of a simple will, it is not unusual for the surviving parent to take over the estate of the minor child as well as his or her physical custody. In most cases, that would be appropriate, however, in some it may not.

Often the reason that people divorce is because one of them is not financially responsible. Under these circumstances, if a financially irresponsible parent gains control over the inheritance of the minor child, the assets and money could be squandered instead of being used for the child's needs. After that, no other resources would be available to pay for the child's health, education or living expenses. Even though the probate court may stay involved by requiring the surviving parent to report the expenditures made by the surviving parent, such reporting is seldom adequately enforced, and when problems are discovered, it is usually too late to fix.

Also, even where it does work, reporting to the probate court involves added expense which takes money away from the minor child's inheritance. With a living trust, even if the surviving parent gains custodial control, he or she can be prevented from gaining financial control over the minor child's inheritance. Instead a trusted family member or friend can be named as the backup trustee to control the minor child's inheritance.

The backup trustee acts as a financial parent and therefore has the power to use the minor child's inheritance to take care of that child's needs. If money is needed by the surviving parent, who is the court appointed guardian, that parent can request the money from the backup trustee. The backup trustee can give the amount requested or needed to the surviving parent to cover that need, or, if giving the money directly to that surviving parent is not appropriate, then the backup trustee can make the payments directly to pay the bills that cover the child's needs. This way the child's financial needs are protected from being squandered.

Often I have clients who are noncustodial parents with similar concerns. Their concern is to prevent a surviving custodial parent from gaining control over their estate after they die. Remember, with a simple will it is not unusual for a surviving parent to gain control over a minor child's inheritance. Many noncustodial parents are concerned that such control by the surviving parent would be abused, and the money would be used to pay for things for that custodial parent instead of the minor child's needs. Again, this is prevented where a trusted family member or friend is used as the backup trustee.

In both of the above cases, with a living trust, there is also a built in system of checks and balances that is better than probate court involvement. The backup trustee is required to provide the surviving parent or guardian of the minor child with the financial records of the child's inheritance at least once a year. This way the child's guardian or surviving parent is aware of what is going on even though that parent will have no direct control over the money. This is done privately without the cost or interference of the probate court.