How to Set Up a Trust for a Minor Child in New York: Trust, UTMA Account, or Surrogate's Court Guardianship

By Albert Goodwin, Esq., attorney admitted in New York. Law Offices of Albert Goodwin, PLLC. Last reviewed 2025.

In New York, a child under 18 cannot receive an inheritance, life insurance proceeds, or a retirement account directly. If you leave property to a minor without a trust, the Surrogate's Court appoints a guardian of the property under Article 17 of the Surrogate's Court Procedure Act (SCPA), the money sits in a court-controlled bank account, and the child takes everything outright at 18. A trust avoids that process. It lets you decide who manages the money, what it may be spent on, and the age at which your child receives it.

This page covers the New York rules that matter to parents and grandparents: what happens by default, the choice between a trust, a custodial account under the New York Uniform Transfers to Minors Act (UTMA), and court guardianship, the trust structures used for minors, the beneficiary-designation mistake that undoes many plans, and how the documents must be signed under New York law. For a general comparison of trust types, see our pages on the benefits of a living trust, the advantages and disadvantages of a testamentary trust, and what can and cannot go into a revocable trust. This page does not repeat that material.

What Happens When a Minor Inherits in New York Without a Trust

New York treats anyone under 18 as an infant for legal purposes (CPLR 105(j)). An infant cannot give a valid receipt for money, so a bank, brokerage, insurer, or executor will not pay a minor directly. Parents are the natural guardians of a child's person, but New York does not make a parent the guardian of a child's property automatically. Someone must petition the Surrogate's Court (or, in some cases, the Family Court) to be appointed guardian of the property under SCPA Article 17.

Once a guardian is appointed, the following rules apply:

• Joint control of the funds: under SCPA 1708 the court will usually dispense with a surety bond only if the money is deposited in a bank account that may be drawn on solely by court order. The guardian cannot write checks on the account without a petition.
• Court approval for spending: because New York parents have a legal duty to support their children (Family Court Act 413), the court is reluctant to release a child's inheritance for ordinary living expenses. Requests for tuition, medical costs, or other needs require a written application with supporting documents.
• Annual reporting: SCPA 1719 requires the guardian to file an annual inventory and account with the court showing what the property is and how it was handled.
• Automatic termination at 18: the guardianship ends when the child turns 18. The balance is paid to the child outright, with no restriction on how it is spent.
• Guardian ad litem in the estate proceeding: if the inheritance passes through a probate or administration proceeding, the court may appoint a guardian ad litem under SCPA 403 to represent the minor's interests. The guardian ad litem's fee is paid from the estate. A parent with no conflicting interest can sometimes appear for the child under SCPA 402, but that is at the court's discretion.

The result is a plan that is managed by the court, with legal fees at each step, and that hands a lump sum to an 18-year-old. For a sense of how long the estate side takes, see a sample NYC probate timeline.

Three Ways to Leave Assets to a Minor in New York

A New York parent or grandparent has three choices. Each has a statutory basis, and each produces a different result at age 18 or 21.

Option 1: A trust for the child

A trust holds the property in the name of a trustee you select. You write the rules: the age or ages of distribution, the purposes for which the trustee may spend, and who takes over if the trustee dies or resigns. The trust can be created in your will (a testamentary trust) or in a revocable living trust signed during your lifetime. New York law adds a protection you do not have to draft: under EPTL 7-1.5, a beneficiary's right to trust income cannot be assigned or reached by the beneficiary's creditors unless the trust document says otherwise.

A trust can also hold property for several children in one fund, sometimes called a pot trust, until the youngest reaches a stated age. That lets the trustee spend more on a younger child's education without short-changing an older child who has already finished school.

Option 2: A UTMA custodial account

New York adopted the Uniform Transfers to Minors Act in EPTL Article 7, Part 6 (EPTL 7-6.1 through 7-6.26). A transfer is made to a named adult "as custodian for [child] under the New York Uniform Transfers to Minors Act" (EPTL 7-6.9). The custodian may spend for the child's benefit without court approval (EPTL 7-6.14) and does not file annual accounts with the court unless someone demands one (EPTL 7-6.19).

The limits are set by statute. Under EPTL 7-6.20, the custodian must turn the property over to the child at 21 if the transfer was a lifetime gift or came from a will or trust that authorized the custodianship (EPTL 7-6.4 and 7-6.5), and at 18 if the transfer was made by a fiduciary without such authorization (EPTL 7-6.6 and 7-6.7). You cannot push the age to 25 or 30 in New York, and you cannot stagger payments. One custodian serves for one child, so a gift to three children means three accounts. If a will does not authorize a UTMA transfer, EPTL 7-6.6 lets an executor make one only if it is in the child's best interest, and a transfer worth more than $10,000 requires court authorization.

A UTMA account is the right tool for a modest gift from a grandparent or for a bequest small enough that a trust would cost more than it is worth. It is the wrong tool for a life insurance policy, a house, or a sum that an unsupervised 21-year-old should not control.

Option 3: Leave it outright and accept guardianship

If you name the child directly, or if you die without a will and the child inherits under EPTL 4-1.1, the Article 17 guardianship described above is the result. Some families accept this for very small amounts because the court can sometimes direct a simpler arrangement for a small sum. For anything substantial, it is the most expensive and least flexible option.

Trust Structures Used for Minors in New York

Testamentary trust under a will

Most New York parents of young children use this structure. The will leaves the children's share to a named trustee, and the trust takes effect only if a child is under a stated age when the parent dies. The will must be executed under EPTL 3-2.1 (signed at the end, in the presence of two attesting witnesses, with a declaration that the document is the signer's will). After probate, the trustee applies for letters of trusteeship under SCPA 1502 and then administers the trust without further court supervision unless a beneficiary objects or an accounting is required. The will should name the trustee expressly. An executor does not become trustee by default; if the will is silent, the court appoints one.

Because the will goes through probate, the minor is an interested party and the court may appoint a guardian ad litem. The trust itself, once funded, avoids the Article 17 guardianship. See wills for parents of minor children in NYC for how the trust fits with naming a guardian of the person.

Trust under a revocable living trust

A revocable living trust signed under EPTL 7-1.17 can contain the same minor's-trust provisions and avoids probate for the assets titled in it, which also avoids the guardian ad litem appointment in the estate proceeding. A pour-over will under EPTL 3-3.7 catches anything left outside the trust. The living trust must be in writing, signed by the creator and at least one trustee, and either notarized in the manner of a deed or signed in front of two witnesses who also sign. The trust does nothing for assets that are never retitled, which is the most common failure with this structure. See avoiding probate in New York.

Section 2503(c) minor's trust

A gift to a trust normally does not qualify for the federal gift tax annual exclusion because the child has no present interest. Internal Revenue Code section 2503(c) creates an exception for a trust that (1) permits the trustee to spend income and principal for the child before 21, (2) pays whatever remains to the child at 21, and (3) pays the remainder to the child's estate or appointees if the child dies before 21. Gifts to such a trust qualify for the annual exclusion ($19,000 per donee in 2025, indexed for inflation).

The age-21 requirement does not force the trust to end at 21. The accepted drafting technique, approved in Revenue Ruling 74-43, gives the child a limited window at 21 (often 30 to 60 days) to demand the trust property. If the child does not exercise the right, the trust continues under whatever terms you wrote. The child must receive notice of the withdrawal right for this to work.

Crummey trust

A Crummey trust (named for Crummey v. Commissioner, 397 F.2d 82 (9th Cir. 1968)) qualifies gifts for the annual exclusion by giving the beneficiary a temporary right to withdraw each contribution, typically for 30 days, after written notice. If the right lapses, the gift stays in the trust. For a minor, the notice goes to the child's parent or guardian. Unlike a 2503(c) trust, a Crummey trust can run to any age and can hold gifts for several children in one document, and it is the standard vehicle for an irrevocable life insurance trust. The drafting must address the lapse rules of Internal Revenue Code section 2514(e), which treat a lapse of more than $5,000 or 5 percent of the trust in a year as a gift by the beneficiary. For how these trusts fit into larger plans, see advanced New York estate planning techniques.

529 plan as an alternative for education

A 529 plan is not a trust, but it is often the better tool for education money. The account owner (usually a parent or grandparent) keeps control, can change the beneficiary to another family member, and names a successor owner. Earnings are tax-free when used for qualified higher-education expenses. New York residents may deduct contributions to New York's 529 College Savings Program from state taxable income, up to $5,000 a year ($10,000 for a married couple filing jointly). Federal law treats up to $10,000 a year of K-12 tuition as a qualified expense, but New York does not, and a K-12 withdrawal triggers recapture of the state deduction. Federal gift tax rules allow a contributor to elect to spread a single contribution over five years of annual exclusions ($95,000 in 2025). A 529 does not cover housing before college, medical costs, or a car, so it is usually paired with a trust rather than used instead of one.

Supplemental needs trust for a child with a disability

If your child has a disability that may lead to Medicaid or SSI eligibility, an outright inheritance, a UTMA account, and an ordinary support trust can all disqualify the child from benefits. New York authorizes a third-party supplemental needs trust under EPTL 7-1.12, and a child with an intellectual or developmental disability may need a guardian under SCPA Article 17-A once the child turns 18. We cover that structure separately on our page about the benefits of a special needs trust.

Beneficiary Designations: The Mistake That Overrides the Trust

A will or trust controls only the assets that pass under it. Life insurance, retirement accounts, annuities, and transfer-on-death accounts pass by beneficiary designation. Naming the child directly on these forms sends the money straight into an Article 17 guardianship, no matter how carefully the trust was drafted.

Life insurance

An insurer will not pay a minor. Name the trust, not the child. EPTL 13-3.3 permits a policy to be payable to a trustee named in a will or under a trust agreement, including a trust that is not yet funded. The designation should read along the lines of "the trustee of the trust for [child] under the will of [parent]" or "the trustee of the [name] Revocable Trust dated [date]." Check group policies through an employer as well as individual policies.

Retirement accounts

The SECURE Act requires most non-spouse beneficiaries to empty an inherited IRA or 401(k) within 10 years. A minor child of the account owner is an "eligible designated beneficiary" under Internal Revenue Code section 401(a)(9)(E)(ii)(II), which allows stretched distributions until the child reaches 21 (the age fixed by the 2024 final regulations), after which the 10-year clock starts. A grandchild, niece, or nephew does not get this exception.

A trust can be the beneficiary and still use the child's status if it qualifies as a see-through trust under the regulations. The drafting choice is between a conduit trust, which passes each required distribution out to the child, and an accumulation trust, which lets the trustee hold distributions inside the trust at the cost of higher income tax. Naming a minor directly on an IRA produces a guardianship and, because the guardian must take distributions as the court permits, often produces missed deadlines. Review these designations whenever a child is born or a plan is signed.

Bank and brokerage accounts

"In trust for" (Totten trust) bank accounts under EPTL 7-5.1 and transfer-on-death brokerage accounts pay the named person directly. If that person is a minor, the same guardianship problem follows. Either name the trust or leave the account to pass under the will.

Who Can Serve as Trustee in New York

For a testamentary trust, SCPA 707 lists who cannot receive letters of trusteeship: a person under 18, an incompetent, a felon, a non-domiciliary alien (unless serving with a co-fiduciary who lives in New York), and anyone the court finds unfit because of substance abuse, dishonesty, improvidence, want of understanding, or inability to read and write English. The same list is a sensible screen for a living trust even though the statute does not strictly apply.

A trustee who lives in another state is allowed, but consider the practical side: the court may require a bond, a bank may want a local signer, and a trustee in California who must approve a tuition payment in Brooklyn is a slower trustee. A grandparent in his seventies is a common first choice and a poor long-term one; name at least one successor and give someone (often the surviving spouse or the child at a stated age) the power to appoint a replacement if the named trustees are gone. A corporate trustee charges fees under its published schedule (SCPA 2312) and is worth considering for large trusts or where family members cannot work together; see using a bank as trustee. Individual trustees of a testamentary trust are entitled to statutory commissions under SCPA 2309, and all trustees must follow the prudent investor rule in EPTL 11-2.3.

The guardian of the person (who raises the child) and the trustee (who manages the money) can be the same person or different people. Separating the roles builds in a check: the guardian asks, the trustee pays. Combining them is simpler. Decide which matters more in your family.

Distribution Ages and Spending Standards

Most New York trusts for minors give the trustee discretion to pay for the child's health, education, maintenance, and support (the "HEMS" standard, which also keeps a parent-trustee from being treated as owning the trust for estate tax purposes) and then distribute principal in stages, for example one-third at 25, one-half of the balance at 30, and the rest at 35. A trust that pays everything at 18 or 21 is only marginally better than a UTMA account. A trust that holds everything until 40 with no discretionary payments invites resentment and a petition to the Surrogate's Court.

Conditions tied to grades, sobriety, or marriage are legal in New York if they are not against public policy, but they are hard to administer and easy to litigate. Give the trustee discretion and a letter of wishes instead of hard rules. Include a provision allowing the trustee to pay a child's share to a UTMA custodian or to hold back distributions if the child is in the middle of a divorce, a lawsuit, or a bankruptcy.

Taxes: Federal and New York

A revocable trust saves no income tax and no estate tax during your lifetime; the assets remain yours for both purposes. Its tax value comes later, when it can hold a child's share in a form that keeps the money out of the child's own taxable estate and away from the child's creditors.

New York imposes its own estate tax under Tax Law Article 26, separate from the federal tax. The New York basic exclusion amount is $7,160,000 for deaths in 2025, against a federal exemption of $13,990,000. New York's tax has a cliff: under Tax Law 952, if the taxable estate exceeds the exclusion by more than 5 percent, the entire estate is taxed, not just the excess. New York has no gift tax, but Tax Law 954(a)(3) adds back certain gifts made within three years of death. A New York family with a house, life insurance, and retirement accounts can cross the state threshold without feeling wealthy, which is why irrevocable gift trusts and insurance trusts for children appear in plans well below the federal exemption.

On income tax, a trust that retains income reaches the top federal bracket at about $15,650 of taxable income in 2025. Income distributed to or for the child is taxed to the child instead, subject to the "kiddie tax" under Internal Revenue Code section 1(g), which taxes a child's unearned income above a small threshold at the parents' rate. Trustees generally distribute income for the child's expenses rather than accumulate it, unless the trust is an accumulation trust holding retirement benefits.

Trusts, UTMA Accounts, and College Financial Aid

The FAFSA counts a trust in which the student is the beneficiary as a student asset even if the trustee has full discretion and the student cannot touch the money, with a narrow exception for trusts restricted by a court order. Student assets are assessed at 20 percent in the Student Aid Index formula; parent assets are assessed at a maximum of about 5.64 percent. A UTMA account is a student asset. A 529 owned by a parent is a parent asset, and since the 2024-25 FAFSA, distributions from a grandparent-owned 529 are no longer reported as student income. Private colleges that use the CSS Profile ask their own questions and may treat these assets differently. If financial aid is a factor, the structure of the trust and the timing of distributions should be reviewed with that in mind before the child's junior year of high school.

Signing and Funding the Documents in New York

1. Decide the structure: a testamentary trust in a will for most families; a revocable living trust where probate avoidance matters; a 2503(c) or Crummey trust for lifetime gifts; a 529 for education; a supplemental needs trust where disability is a concern.
2. Draft and sign the will: execution under EPTL 3-2.1 requires your signature at the end, two attesting witnesses who sign within 30 days of each other, and your declaration that the instrument is your will. An attorney-supervised signing with a self-proving affidavit under SCPA 1406 avoids the need to locate witnesses at probate.
3. Draft and sign any living trust: execution under EPTL 7-1.17 requires a writing signed by you and at least one trustee (you may be the sole trustee), either notarized like a deed or signed before two witnesses. Amendments must follow the same formality.
4. Fund the plan: retitle assets into a living trust; update life insurance, retirement, and transfer-on-death designations to name the trustee; sign a pour-over will under EPTL 3-3.7.
5. Name guardians of the person: a will may nominate a guardian of the person for a minor child under SCPA 1710; the court confirms the appointment after death.
6. Review on each life event: a new child, a divorce, a move out of state, or a change in the federal exemption can each change the right answer.

Fees vary by firm and by how much work the plan requires. In the New York City market, a will that includes a trust for minor children is commonly quoted as a flat fee in the low thousands of dollars; a revocable-trust-based plan or an irrevocable gift trust costs more because of the drafting and funding involved. Ask for a written fee agreement before work begins. New York's Rules of Professional Conduct require one for most matters over $3,000.

Frequently Asked Questions

Can a minor be the beneficiary of a trust in New York?

Yes. A minor can be a beneficiary of any trust; a minor cannot be a trustee (SCPA 707(1)(a)) and cannot receive distributions directly. The trustee pays expenses on the child's behalf or to the child's parent or guardian.

Who manages money a child inherits if there is no trust?

A guardian of the property appointed by the Surrogate's Court under SCPA Article 17. The funds are held subject to court order until the child turns 18, and the guardian files annual reports under SCPA 1719.

What age should a child receive an inheritance?

New York law sets 18 for guardianship funds and 21 for UTMA gifts. A trust can set any age. Staggered distributions in the mid-twenties to mid-thirties, with discretionary payments before then, are the most common choice, but the right age depends on the size of the fund and the child.

Can a trust pay for private school?

Yes, if the trust document allows payments for education, which a HEMS standard does. A 529 plan may also pay up to $10,000 a year of K-12 tuition under federal law, but New York treats that withdrawal as non-qualified for state tax purposes.

Can I set up a trust for a grandchild?

Yes. A grandparent can create a lifetime 2503(c) or Crummey trust, fund a 529, make a UTMA gift (which ends at 21), or leave a testamentary trust in a will. Gifts to grandchildren may trigger the federal generation-skipping transfer tax above the exemption, and a grandchild is not an eligible designated beneficiary for an inherited IRA. Coordinate with the parents' plan so the grandchild's money is not managed by a different trustee under different rules.

Does the trust avoid the guardian ad litem?

A funded living trust does, because there is no court proceeding. A testamentary trust does not; the minor is an interested party in the probate proceeding and the court may appoint a guardian ad litem under SCPA 403 even though no Article 17 guardian will be needed afterward.

Can the trustee be the child's other parent after a divorce?

Yes, but many parents in that situation name a sibling or a corporate trustee instead, and draft the trust so that the trustee, not the custodial parent, decides how the money is spent. The former spouse can still be guardian of the person while someone else controls the funds.

Talk to a New York Trust Attorney

The Law Offices of Albert Goodwin, PLLC drafts wills, living trusts, 2503(c) and Crummey trusts, and supplemental needs trusts for parents and grandparents in New York City, Long Island, and Westchester. We also represent families already dealing with an Article 17 guardianship who want to move a child's funds into a better structure where the court permits. To discuss a trust for a minor child, call 212-233-1233 or read more about our trust attorney services in NYC.