How to Plan For a Kid Who Can’t Handle Finances

Reviewed by Attorney Kim Hegwood Published October 20, 2016 · Updated November 3, 2026

Many parents face this issue, says NJ 101.5 in its recent post, “When you don’t trust a child with money.”

There are some children, regardless of age, who need help managing their finances. By the same token, there are also some children who are good with money who make mistakes upon inheriting a large sum of money all at once.

If you think that a child needs restrictions, it’s always a good idea to look into your options with an experienced estate planning attorney. If this is done to protect the child from himself or herself, there is really nothing unfair about this type of plan. In fact, this action may actually help and not be seen as “unfair” treatment.

If parents have concerns about a child’s ability to handle an inheritance, they can leave their inheritance in trust for the child’s benefit. When creating the trust, a trustee must be named. It probably shouldn’t be another child, which could create unrest in the family. Rather, you might designate a trusted family friend or advisor as trustee, or you could use a financial institution that provides trust services.

The terms of the trust can be customized to the child’s needs and could stipulate that he or she receive a fixed percentage of the assets each year from the trust. This alleviates much of the discretion on the part of the trustee regarding whether or not to make a distribution. Another option is to allow the trustee to decide the amount and timing of distributions.

Trusts are extremely flexible vehicles and can provide protection for beneficiaries, like a son or daughter who can’t manage his or her finances.

Reference: NJ 101.5 (August 31, 2016) “When you don’t trust a child with money”

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