How to Get More Control Over the Money You Leave Your Kids

Natalie Hood is an advanced planning attorney with Sophisticated Planning Strategies at Northwestern Mutual.

If you want to leave money to your children but worry about what happens to it after it leaves your hands, you have several options to address these concerns. Estate planning tools—especially trusts—allow you to define how assets are managed, when distributions are made, and what the money may be used for. You don't have to choose between being generous and being intentional when it comes to leaving money to your loved ones.

Nearly one-third (31 percent) of U.S. adults anticipate leaving an inheritance or financial gift to a loved one—that’s up from 26 percent just a year earlier, according to Northwestern Mutual's 2025 Planning & Progress Study. Yet a number of those same people haven't put a structure in place to define how that transfer will happen. The gap between wanting to leave something behind and planning how it will be distributed is exactly where estate planning tools can help.

What happens when you leave money outright

When assets pass to a child outright—such as through a direct beneficiary designation, a Payable on Death (POD) or Transfer on Death (TOD) designation, or through a will after the probate process is finished—the child generally receives full control once the transfer is complete. This may be exactly right in some situations. But for many parents, especially those thinking about large transfers of funds or those with children who are minors, going through a difficult period, or simply not yet experienced in managing significant money, outright transfers can feel like giving up the steering wheel entirely.

A will can also direct assets into a trust

It is helpful to note that a will can provide important structure by outlining how assets should be distributed after death, and it can also direct that a beneficiary's inheritance be held in trust rather than distributed outright. But when assets are left directly to a beneficiary, there is generally no ongoing mechanism to specify what the money is used for, when the child gains access to it, or how it is managed if the child faces financial difficulties in the future. The important distinction is not simply whether your estate plan uses a will or a trust as the primary planning document; it is whether a beneficiary receives assets directly, or if their share is structured to remain in trust. A minor child who inherits assets directly may find those assets controlled by a court-appointed guardian until they reach adulthood—at which point full control passes to them, regardless of readiness.

How a trust puts you in the driver's seat

A trust is a legal arrangement that lets you transfer assets to a trustee (someone you select) to manage and distribute those assets to your beneficiaries according to terms you set. Unlike an outright transfer, a trust does not immediately distribute your assets to your named beneficiaries. Instead, it carries your intentions forward.

Trusts come in different forms, and the right structure depends on your goals, your family situation, and the type of assets involved. A revocable living trust can be changed during your lifetime, which gives you flexibility as your circumstances evolve, and will be the main focus of this article. An irrevocable trust generally cannot be changed once established, but it may offer additional protections. Your attorney can discuss the different types of trusts to determine which option best fits your situation.

One of the most important advantages of a trust is that it can keep assets from passing through the probate process, which is public, time-consuming, and often costly. It can also help keep assets separate from a beneficiary's marital property, reduce exposure to creditors, and prevent a large inheritance from landing in a young adult's hands before they're ready for it, depending on your personal goals.

Setting the terms: When, how much, and for what purposes

This is where a trust offers something no outright transfer can: the ability to define the rules. When you work with an estate planning attorney to draft your trust document, you can specify distribution terms as broadly or as precisely as your goals require.

Milestone-based distributions

One common approach is to tie distributions to a beneficiary's age or certain life milestones. For example, you might structure a trust so that a child receives a portion of the assets at age 25, another portion at 30, and the remainder at 35. You could also link distributions to events—graduation from college, marriage, or the purchase of a first home. This approach gives younger beneficiaries time to develop financial maturity before they manage larger sums of money.

Purpose-based distributions

Another approach focuses not on when distributions happen but on what they can be used for. A trust can authorize the trustee to make distributions for specific purposes—education expenses, healthcare, housing costs, or general support—while limiting or restricting others. This structure should give you confidence that the money you worked hard to accumulate will support your child's real needs rather than disappear in ways you wouldn't have chosen.

These two approaches are not mutually exclusive. Many trust documents combine milestone-based and purpose-based language to give the trustee structure while preserving the flexibility to respond to circumstances you can't fully anticipate today.

For families concerned about a beneficiary who may have difficulty managing a large sum of money, a spendthrift provision can add an additional layer of protection.

Choosing a trustee

The trustee is the person or institution that will carry out the terms of your trust, manage the assets you leave behind, and exercise judgment when the trust document gives them the discretion to do so. Choosing a trustee is one of the most consequential decisions in the entire planning process—and one that deserves as much thought as the trust terms themselves.

You can name an individual as trustee—a family member, a trusted friend, or a professional such as an attorney or CPA. You can also name a corporate trustee, such as a bank or trust company, which offers professional management and continuity. Some families appoint co-trustees, pairing an individual who knows the family with a corporate trustee who manages the administrative and investment responsibilities.

Think carefully about what you're asking a trustee to do. They will need to make financial decisions, communicate with beneficiaries, keep records, file tax returns for the trust, and—if the trust language gives them discretion—exercise judgment about when and how to make distributions. That's a significant responsibility. The person or institution you choose should have both the competence and the integrity to handle these responsibilities.

Starting the conversation with your family

No trust document is a substitute for honest and direct communication with your loved ones. Six in 10 Americans who expect to leave an inheritance say they have already discussed their plans with their family, according to Northwestern Mutual's 2025 Planning & Progress Study—but that means four in 10 have not. This gap can create confusion, hurt feelings, and conflict at exactly the moment your family is most vulnerable.

You don't need to share every detail of your estate plan with your children. But letting them know your general intentions—that you're putting a thoughtful structure in place to support them and telling them who will be responsible for carrying that out—can reduce uncertainty and prevent misunderstandings later. If you're naming a sibling or an outside professional as trustee instead of the child who will benefit, explaining your reasoning now is far better than leaving it to be discovered after you're gone.

These conversations can feel awkward. They touch on mortality, money, and family dynamics all at once. Starting early, keeping the tone supportive rather than transactional, and framing your planning as an act of care rather than control can make these conversations go more smoothly. You might also consider speaking with your children separately before bringing everyone together, especially if family relationships are complex. Your Northwestern Mutual advisor can help you think through how these conversations fit into your broader estate planning goals.

Frequently asked questions

What is the difference between leaving money outright and leaving it in a trust?

Leaving money outright means a beneficiary receives the assets directly with full control and no conditions imposed. Placing assets in a trust for the beneficiary means a trustee manages and distributes those assets according to the terms you set—for example, when the distributions happen, how much is distributed at a time, and what the money may be used for. Leaving a beneficiary’s share in trust gives you more control over how your intentions are carried out after you're gone.

Can I really control what my child spends their inheritance on?

You can place meaningful constraints on how a beneficiary’s trust assets are used. A trust can authorize distributions only for specific purposes—education, healthcare, housing, general support, etc.—and give the trustee discretion to evaluate requests against those criteria. While no structure can guarantee every outcome, a well-drafted trust gives you far more influence over the use of assets than an outright transfer does.

What can a trust be used for—education, healthcare, housing?

These are among the most common purposes families specify in trust documents. You can authorize the trustee to make distributions for education expenses, medical costs, housing down payments, or a broad "health, education, maintenance, and support" standard that gives the trustee flexibility to respond to your beneficiary's genuine needs as they arise. Your estate planning attorney can help you choose language that best matches your goals.

How do I decide who should be the trustee?

Start by thinking about what the role requires: financial competence, good judgment, the ability to communicate with your beneficiaries, and the integrity to follow your intentions even when it's difficult. Consider whether an individual trustee, a corporate trustee, or a combination of both makes sense for your situation. Talk through your options with your advisor and attorney before finalizing your choice. And if you are considering the use of a corporate trustee, you will want to research the fees involved for those trustee services.

Do I need a trust, a will, or both?

It depends on the type of estate plan you put in place. A trust-based plan typically includes both a trust document and a pour-over will, which directs any assets subject to probate back to the trust to be distributed according to its terms. A will-based plan generally does not include a separate trust document, though a will can include testamentary trust provisions that direct a beneficiary's share to be held in trust rather than distributed outright. The biggest difference is that assets properly titled in or payable to a trust generally avoid probate, while assets that pass under a will typically go through probate. Your attorney can help you decide whether it's better to have a will or a trust—or both—given your situation.

When should I involve an attorney, tax professional, and financial advisor?

Ideally, early in the estate planning process—and in coordination with one another. Your estate planning attorney will draft and execute the legal documents. A tax professional can advise on any income, gift, or estate tax considerations connected to your plan. Your Northwestern Mutual advisor can help you understand how your estate plan fits into your broader financial picture and connect you with other professionals as needed. These three roles work best when they work together.