A client once sat in my Manhattan office and told me he wanted to leave his business—a portfolio of commercial properties—directly to his 19-year-old son in his will. I asked him a simple question: “Is your son ready to manage a multi-million-dollar real estate operation tomorrow morning?”
The answer, of course, was no. The young man was a fine student, but he had no experience in property management, tenant negotiations, or corporate finance. A direct inheritance of that magnitude could have easily overwhelmed him, or worse, been squandered. This conversation marks the end of simple inheritance and the beginning of intentional legacy planning. It is where we start talking about a trust.
Many people think of a trust fund as a pile of money waiting for a child on their 18th birthday. In my practice, I see it differently. A trust is not a bank account. It is a set of instructions—a framework you create to protect, manage, and distribute assets on your own terms, long after you are gone. It is an act of stewardship.
More Than Money: The Purpose of a Trust
When you leave assets to a minor child through a will, or with no plan at all, the Surrogate’s Court often gets involved. The court may appoint a guardian to manage the funds until the child reaches the age of majority, which is 18 in New York. At that point, the child receives the entire inheritance in one lump sum, with no restrictions and no guidance.
For most 18-year-olds, that is not a gift; it’s a burden. A trust allows you to bypass this scenario. Instead of giving a child full control at an arbitrary age, you create a structure that can support them through life’s key stages.
The core of a trust is control and protection. You decide how the funds can be used—for education, a down payment on a home, starting a business, or covering medical expenses. You also decide when the beneficiary receives access to the principal. Perhaps they receive portions at ages 25, 30, and 35, giving them time to mature financially. Or perhaps the trust is designed to last their entire lifetime, protecting the assets from creditors, poor financial decisions, or a future divorce.
The Trustee: Your Most Important Decision
When you create a trust, you name a trustee. This person or institution has a legal obligation—a fiduciary duty—to manage the trust assets prudently and in the best interests of the beneficiary. Choosing the trustee is the most critical decision you will make.
You can name a family member, a trusted friend, or a corporate trustee like a bank or trust company. A family member knows your child and your values, but they may lack financial expertise or the emotional fortitude to say “no” when necessary. A corporate trustee is impartial and professional, with deep experience in investment management and administration, but comes with a fee and lacks that personal connection.
Sometimes, a combination is best: a family member as a co-trustee alongside a corporate trustee, blending personal insight with professional discipline. Whoever you choose, they will be bound by New York’s Prudent Investor Act, codified in EPTL § 11-2.3. This statute requires a trustee to exercise the skill and caution that a prudent person would in managing their own affairs. It’s not a passive role; it’s an active, demanding responsibility.
Structuring the Trust: Your Instructions for the Future
The trust document itself is your rulebook. It contains your specific instructions for how the trustee should manage and distribute the assets. We work with clients to build a framework that reflects their values and goals for their child. Common distribution standards include:
- HEMS Standard: This is a common approach. It allows the trustee to distribute funds for the beneficiary’s Health, Education, Maintenance, and Support. These terms provide a flexible but defined standard, giving the trustee discretion while preventing frivolous spending.
- Age-Based Distributions: As mentioned, you can stagger the distribution of principal over time. This gives a young beneficiary multiple opportunities to learn how to manage money responsibly, rather than getting it all at once.
- Incentive Provisions: Some clients choose to build in incentives. For example, a trust might be structured to match a child’s earned income, encouraging a strong work ethic. Or it could provide the funds to start a business, provided the trustee approves a sound business plan.
The key is to be deliberate. The goal isn’t just to transfer wealth; it is to provide opportunity and security without undermining a child’s drive and purpose.
Revocable vs. Irrevocable: The Question of Control and Permanence
Finally, trusts come in two primary forms: revocable and irrevocable. A revocable living trust is one you create during your lifetime that you can change or cancel at any time. It’s flexible, but the assets remain part of your taxable estate.
An irrevocable trust, once created, generally cannot be changed. The decision to place assets into an irrevocable trust is a significant one. In exchange for giving up control, these trusts can offer powerful benefits, including removing assets from your taxable estate and providing significant protection from future creditors. For high-net-worth families in New York, this can be a critical tool for generational wealth preservation.
The right structure depends on your assets, family dynamics, and long-term goals. It is a process of deliberate, prudent planning.
The first step is not to draft a document, but to define your goals. Before we ever discuss legal mechanics, I ask my clients to articulate their vision for their child’s future. I invite you to schedule a preliminary meeting with our firm to do just that—to map out the principles that will serve as the foundation for your child’s legacy.
