The Young Adult Trust

Times flies and before you know it, your children are graduating from high
school and college and maturing into young adults. Once children reach the
age of 18, the state considers them adults, regardless of whether they remain
living at home, go away to attend college, or begin working full-time.

One issue for many families is how to handle
the transfer of valuable assets to their
children when they reach the age of majority,
usually 18 years in most states. Although the
children may have matured considerably
over the years and the state considers them
adults, it may not be wise to transfer valuable
assets to them without any restrictions or
oversight. A solution to this dilemma is the
Young Adult Trust – a revocable living trust
created by your child.

A trust is a legal arrangement through which a person (or an institution, such
as a bank or law firm), called a “trustee,” holds legal title to property for
another person, called the “beneficiary.” In the Young Adult Trust, your child
may be named as one of the co-trustees, while also being designated as the
beneficiary.

The rules or instructions under which the trustee operates are set out in the
trust instrument and can be tailored to meet your family’s individual needs.
Unlike wills, trusts are private documents and only those individuals with a
direct interest in the trust need know of trust assets and distribution. Provided
they are well-drafted, another advantage of trusts is their continuing
effectiveness even if the donor dies or becomes incapacitated. A revocable
living trust, such as the Young Adult Trust, may be modified or revoked at any
time.

Transfers under the California Uniform Transfers to Minors Act (CUTMA)
provide a useful ownership form for minors, but are designed to terminate once
the beneficiary reaches age 18. The revocable living trust allows a young adult
to delegate oversight of assets to a parent until a later date, such as when the
beneficiary reaches age 25 or 30.

The Young Adult Trust, a sort of beginner’s trust, provides the following
features:

  • Determination of trustees by the young adult (usually a parent and the  
    young adult acting as co-trustees)

  • A pour-over will, so that any assets left in the young adult’s name would
    be transferred to the trust upon his or her death

  • Healthcare documents appointing an agent and providing direction for
    health and medical decisions in the case of disability

  • A durable power of attorney for finances

  • Named beneficiaries, including charities, if desired

In addition to the features described above, the trust provides many other
benefits. The Young Adult Trust allows your child to have a voice in the
management of the trust assets within certain limitations and with responsible
guidance.

Additionally, the trust creates a vehicle into which gifts can continue to be
given and remain shielded from irresponsible use. The trust provides a
mechanism with which to keep assets under family control, and also functions
as a sort of pre-nuptial agreement, indicating an intent to keep the assets
separate prior to marriage.

Perhaps most important, the Young Adult Trust allows a parent to teach their
children proper financial management and discipline. As the child continues to
age, responsibility can be shifted to the young adult

By Steven M. Ratner
Law Offices of Steven M. Ratner
July, 2006

Genwich Life Services LLC

"Successfully guiding multi generational families through life stage planning"