To set up a trust for a minor, you choose a trust structure, name a trustee, draft a legal document that spells out how and when the child receives money, sign it in front of a notary, and then retitle assets into the trust’s name. Professional drafting typically runs $1,000 to $3,500, and the full process takes anywhere from a few weeks to a couple of months depending on how complex your assets are. Done properly, the trust gives you control over the timing and purpose of every distribution instead of handing a lump sum to an 18-year-old.
Choose the Trust Structure
The first question is whether you want the ability to change your mind. A revocable living trust lets you alter terms, swap trustees, or dissolve the arrangement while you’re alive. An irrevocable trust locks the terms once you sign, which pulls the assets out of your taxable estate and offers stronger creditor protection. Permanence is the price of those benefits.
Either version can be created during your lifetime (an inter vivos trust) or through your will (a testamentary trust, which only takes effect after you die and only after probate). If the point is to protect a child now, a living trust is almost always the right vehicle.
Section 2503(c) Trusts
If you want each contribution to qualify for the annual gift tax exclusion, look at a Section 2503(c) trust. Under federal tax law, contributions count as present-interest gifts if two conditions are met: the trustee can spend the money for the child’s benefit before age 21, and whatever remains must pass to the child at 21. If the child dies before then, the assets go to the child’s estate or under a power of appointment the child holds.1Office of the Law Revision Counsel. 26 USC 2503 – Taxable Gifts
The mandatory access at 21 is the main drawback. Some grantors give the beneficiary a short window to demand distribution at 21 and let the trust continue on new terms if the beneficiary doesn’t act, but the child must have the legal right to take everything at that point.2eCFR. 26 CFR 25.2503-4 – Transfer for the Benefit of a Minor
When a UTMA Account Is Enough
If the amount involved is modest, a custodial account under the Uniform Transfers to Minors Act may cover the need. UTMA accounts hold assets under a custodian until the child reaches the age set by state law, usually 18 or 21. They’re cheaper and simpler than a full trust, but they offer no spendthrift protection, no ability to stagger distributions, and no control past the termination age. For larger sums, or any situation where you want to release money in stages, a trust is the right tool.
Pick a Trustee
The trustee manages every dollar, makes investment decisions, files tax returns, and rules on distribution requests. It’s a real job.
An individual trustee, usually a relative or close friend, knows the child and costs less. Non-professional individual trustees typically take around 0.25% of trust assets per year, and many family members serve without any fee. The risk is a lack of investment expertise, sloppy recordkeeping, or discomfort saying no to a teenager.
A corporate trustee, such as a bank trust department, brings professional management and regulatory oversight. Fees generally run 1% to 2% of trust assets per year, which makes corporate trustees impractical below roughly $300,000 in assets. A $1 million trust pays $10,000 to $20,000 a year in trustee fees alone.
Whichever direction you go, name at least one successor trustee. If the primary trustee dies, becomes incapacitated, or resigns, the successor steps in without a court proceeding.
Set the Distribution Terms
The distribution terms are the heart of the document. Most grantors use the “HEMS” standard, which limits the trustee to distributions for the beneficiary’s health, education, maintenance, and support. That language tracks a specific standard in the federal tax code and keeps the trustee’s discretion from being treated as a general power of appointment, which would defeat the tax benefits of an irrevocable trust.
For the final distribution age, 21 is the floor if you use a 2503(c) structure. Many grantors set the age higher — 25, 30, or beyond — and stagger the payout: a third at 25, a third at 30, the rest at 35. The idea is that a beneficiary who mishandles the first installment has time to grow up before the next one arrives. Whatever ages you choose, the document should be explicit about how the trustee manages assets while the beneficiary is still too young to inherit outright.
Spendthrift Language
A spendthrift clause prevents the beneficiary from pledging their trust interest as collateral or from having creditors seize it before the trustee actually distributes anything. Most states recognize spendthrift protection as long as the document restricts both voluntary and involuntary transfers of the beneficiary’s interest. A simple statement that the trust is held “subject to a spendthrift trust” is usually enough.
Crummey Withdrawal Rights
If you’re using an irrevocable trust and want each contribution to qualify for the $19,000 annual gift tax exclusion in 2026, you’ll need Crummey withdrawal provisions.3Internal Revenue Service. Estate and Gift Tax These give the beneficiary (or a guardian acting for the minor) a temporary right to withdraw each new contribution, which turns a future-interest gift into a present-interest gift for tax purposes.
The withdrawal opportunity must be real. The IRS hasn’t set a firm minimum, but practitioners generally allow at least 30 days; a three-day window has been ruled illusory and cost the exclusion. After the window closes, the money stays under the trustee’s control. The trustee must send a written notice for each contribution, which creates the paper trail the IRS will want to see.
Draft the Document
The trust document captures every decision you’ve made and gives the trustee the authority to act. At a minimum, it should include:
- Full legal names of the grantor, trustee, successor trustee, and beneficiary
- A description of the initial assets going into the trust
- Distribution provisions covering both the discretionary standard and any mandatory age-based distributions
- Trustee powers including the authority to invest, sell assets, hire professionals, and file tax returns
- Spendthrift language restricting the beneficiary’s ability to assign their interest
- Successor trustee provisions with a clear order of succession
- A termination clause stating when the trust ends and how any remaining assets pass
Online legal services sell templates for a few hundred dollars, and they work for straightforward situations with modest assets. Real estate in multiple states, business interests, blended families, or trust assets above $1 million all justify hiring an attorney. Expect $1,000 to $3,500 for drafting depending on complexity and your local market. An attorney can also coordinate the funding step and confirm the document meets your state’s requirements.
Sign the Trust
The document has no legal force until it’s properly signed. The grantor signs before a notary public, who verifies identity and applies an official seal. Having two disinterested witnesses (people who don’t benefit from the trust) present is common practice and strengthens the document even in states that don’t strictly require witnesses for a trust.
The grantor should initial every page to prevent page-swapping after the fact. A separate trustee also signs to accept the appointment. Once the notary completes the acknowledgment, the trust is executed. It still isn’t functional until you put assets into it.
Fund the Trust
An unfunded trust is just paper. The trust only becomes operational when you transfer ownership of assets into it, and this is the step people most often skip or half-finish.
Get a Tax ID Number
A revocable trust uses the grantor’s Social Security number while the grantor is alive. An irrevocable trust needs its own Employer Identification Number from the IRS because it’s a separate taxpayer.4Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN) You can apply online through the IRS website and get the number immediately; a paper Form SS-4 is optional.5Internal Revenue Service. Get an Employer Identification Number The responsible party is the grantor, and the trust name on the application must match the document exactly.6Internal Revenue Service. Instructions for Form SS-4 (12/2025)
Move Each Asset
Every asset type has its own transfer process:
- Bank and brokerage accounts: bring a copy of the trust document (or a shorter certificate of trust, which most institutions accept) to retitle existing accounts or open new ones in the trust’s name. Most institutions do this free or for a small fee.
- Real estate: a new deed naming the trust as owner must be drafted, signed, and recorded with the county recorder. Recording fees typically run $30 to $60 per document but can be higher with local surcharges. Attorney-drafted deeds add a few hundred dollars.
- Stocks and bonds held in certificate form: contact the transfer agent to reregister the securities in the trust’s name.
- Life insurance: update the beneficiary designation form to name the trust as primary or secondary beneficiary, using the trust’s full legal name and date of creation.
Don’t overlook assets you acquire after the trust is created. Any new property meant for the child needs to be titled in the trust or list the trust as beneficiary. A trust that started fully funded can drift into partial funding as new assets slip past.
Plan for the Tax Consequences
Gift Tax
Every transfer into an irrevocable trust is a gift for federal tax purposes. In 2026 the annual gift tax exclusion is $19,000 per donor per recipient, or $38,000 if you’re married and your spouse consents to split gifts.3Internal Revenue Service. Estate and Gift Tax To use the exclusion, the gift must qualify as a present interest, which is why 2503(c) trusts and Crummey powers exist.1Office of the Law Revision Counsel. 26 USC 2503 – Taxable Gifts Anything above the annual exclusion counts against the lifetime gift and estate tax exemption, which is $15,000,000 per individual in 2026, and each gift above the annual exclusion requires a gift tax return on Form 709.
Income Tax on the Trust
Irrevocable trusts that keep their income are taxed at their own rates, and the brackets are compressed. In 2026 a trust hits the 37% federal rate at just $16,000 of taxable income. The full 2026 schedule:7Internal Revenue Service. 2026 Estimated Income Tax for Estates and Trusts
- 10% on taxable income up to $3,300
- 24% on income between $3,300 and $11,700
- 35% on income between $11,700 and $16,000
- 37% on income above $16,000
This schedule creates a strong incentive to distribute income to the beneficiary rather than accumulate it inside the trust. Distributed income is taxed on the beneficiary’s return, where the rates are almost always lower. Note that unearned income above $2,700 received by a child under 19 (or a full-time student under 24) may be taxed at the parents’ marginal rate under the kiddie tax, which partially offsets the benefit.
Annual Filing
Any domestic trust with $600 or more in gross income must file Form 1041 each year, due April 15 for calendar-year trusts.8Internal Revenue Service. Instructions for Form 1041 The trustee also issues Schedule K-1 to each beneficiary who received a distribution. Revocable trusts don’t file separately while the grantor is alive; that income goes on the grantor’s personal return.
What It Actually Costs
People fixate on the drafting fee and forget the rest. A realistic picture:
- Attorney drafting: $1,000 to $3,500 for a standard trust, more for complex arrangements
- EIN application: free through the IRS
- Deed recording, if you transfer real estate: typically $30 to $60 per document, sometimes more
- Notary fees: $5 to $25 per signature depending on the state
- Trustee compensation: 1% to 2% of assets annually for a corporate trustee, roughly 0.25% for an individual
- Annual tax preparation: a CPA preparing Form 1041 typically charges several hundred dollars a year
For a $200,000 trust, the all-in annual cost of professional management can run $3,000 to $5,000. That’s money the child won’t receive. Run the math before committing to a full trust structure for a small amount — a UTMA account may deliver more to the child in the end.