How to Structure Inheritances for Children: Age-Based Distributions and Trust Planning in Minnesota

How to Leave Inheritance to a Minor in Minnesota

How do you leave a million-dollar life insurance policy to a teenager—or a toddler? Will they use it wisely? Will they even be ready for it?

If you’re a Minnesota parent planning your estate, these are important questions. Inheritance planning for children isn’t just about who gets what—it’s also about when and how they receive it.

Here’s how age-based inheritance planning and trusts can help protect your children and your legacy.

Why Naming Minor Children as Direct Beneficiaries Can Backfire

It’s common to want to name your children as the beneficiaries of your life insurance or retirement accounts. But if your children are under 18, those funds will likely require court-supervised guardianship until they reach legal age. Even then, a lump-sum inheritance at age 18 can create more problems than it solves.

Young adults often lack the maturity and financial experience to handle large sums of money. Without oversight, those funds can be spent quickly or misused. This can be especially risky during times of transition, such as while attending college, getting married, job changes, or in the event of divorce.

Worse, siblings who treat their inheritances differently (one saves, the other spends) can develop resentment. A thoughtfully structured estate plan can reduce these risks.

Using a Trust to Structure Inheritance for Young Beneficiaries

A trust is one of the most effective tools for age-based inheritance planning in Minnesota. It gives you control, protection, and peace of mind. Here’s how:

Benefits of Using a Trust for Children’s Inheritance

• Staggered Distributions: You can schedule distributions at key ages, such as 25, 30, or 35, rathar than all at once.

• Professional Oversight: A trustee can manage investments, approve distributions, and provide financial guidance.

• Creditor & Divorce Protection: Trust assets are often protected from lawsuits, creditors, and ex-spouses.

• Custom Terms: You can tailor the trust to your child’s personality, maturity level, and life goals.

• Tax Efficiency: Some trusts may offer tax advantages compared to direct inheritance.

• Avoid Probate: A trust helps keep assets out of probate, allowing for faster and more private distribution.

Tip: At Jacobson Estate Law, we regularly create trusts for Minnesota parents with young children. We help you craft custom distribution plans aligned with your values and your child’s best interests.

Other Ways to Manage Inheritance for Minors

Not every situation requires a trust. Here are other tools Minnesota parents can consider:

• Custodial Accounts (UGMA/UTMA): These accounts allow an adult to manage funds until the child reaches a legal age (usually 18 or 21 in Minnesota).

• Incentive Wills: These wills condition inheritance on specific achievements (e.g., graduation, employment).

• Structured Life Insurance Payouts: Some policies allow for staged payouts over time rather than a lump sum.

• Joint Accounts with Age Restrictions: Allows limited access until the child reaches a designated age.

Can You Prevent a Child from Wasting Their Inheritance?

Even the best plan can’t guarantee perfect decision-making. But with proper structure, you can give your children the guidance and protection they’ll need, while still honoring your intent.

Work With a Minnesota Estate Planning Attorney

At Jacobson Estate Law, we help parents in Minnesota design estate plans that protect their children, now and in the future. Whether you're planning for life insurance, real estate, or retirement accounts, we can help you create the right trust, schedule, and strategy.

Schedule a consultation to get started on your estate plan!