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Introduction
Michelle Dexter: Hi there. Welcome to Keystone Law Firm’s “Legacy Lockdown: From First Steps to Retirement Funds.” My name is Michelle Dexter. I’m an attorney here at Keystone Law Firm. We like to do these webinars to give people information to help keep them up to date on their estate plans, keep them educated about their options, and just generally keep this type of information at the front of their minds.
Keep in mind that this information today is for educational purposes only. It’s not intended to give you specific legal advice. We do encourage you to speak with an attorney directly to learn more about how your specific situation should be handled if you find anything in this webinar today that you determine is beneficial and would like to discuss further.
Today’s agenda: We’re going to start with minor children and some of the things that happen with regards to them, including conservatorships versus trusts, guardianships, special needs, and what can happen with life insurance and retirement accounts.
00:11:26
Michelle Dexter: But we’re also going to talk about beneficiary protections and what things to look for as your beneficiaries become young adults, middle-aged beneficiaries, and even older beneficiaries.
All right, so let’s get started. When we’re talking about minor children, as those of you who have had children know, there are definitely very big ranges for our minor children. We start with the newborn baby stage where they really can’t communicate their needs to you. They move into the school age where they’re very busy with activities, and then we move into the college age where it seems like they need us a little bit less—maybe more financially and more socially. So, we definitely want to talk about all the different levels, keeping in mind that even within the term “minor children,” there’s a lot of range that you should be considering.
Conservatorships vs. Trusts
Michelle Dexter: All right. Conservatorships versus trusts. A trust is a document that you can create independently of court that can designate who is going to handle money for your beneficiaries and yourself in the event that you can’t manage it.
00:12:34
Michelle Dexter: A conservatorship is a court-appointed person who is designated to make financial decisions for you or receive beneficiary distributions for somebody who’s under the age of 18 or who may have an incapacity issue.
When you are distributing your assets—especially to a minor child through a trust—you are designating who is going to manage that money for them and who is going to be in charge of it. If the first person can’t, you can have your Plan A, your Plan B, and your “worst-case scenario” lineup of people. But also, you can designate what these funds are going to be used for. Are they intentionally going to be used for their education? Do you want to have any restrictions on them? Do you want them to be able to get them at a certain age?
When you’ve got a conservatorship, once that person turns 18—assuming that they otherwise have capacity—they go back to court, and the court is going to release that money to them.
00:13:45
Michelle Dexter: For those of you who have a legacy and have money that you want to pass on to the next generation, and maybe even your grandchildren, you want to make sure that money is being well spent. You don’t want to think about an 18-year-old who may receive the money and think, “Wow, I’m rich. I don’t ever have to work again,” or “I’m going to go out and buy the fastest sports car on the market.” They might make a choice with that money that does not save it long-term. Your goal may be to give them the ability to buy a house in the future, save up for retirement, or just generally make their life better. Their immature brains may not realize the benefit of holding on to that money and saving it.
By having a trust, you can force some of that delay in distribution. You can force the conditions that a conservatorship won’t do once they turn 18. When we’re comparing a conservatorship versus a trust, the first thing is cost. A trust is going to be significantly less expensive.
00:14:45
Michelle Dexter: The cost of going to court for a conservatorship is generally—if you’re hiring an attorney—probably $10,000 to $15,000. Our basic trust package is about $2,000 right now here in early 2026. So, you can see that is a significant financial difference.
With regards to privacy, the conservatorship documents are court-filed. That means they can become part of the public record. With a lot of stuff for minors, we will do our best to mark it as confidential, but it may still release more information than you intended. With a trust, it doesn’t have to be filed or recorded anyplace public, so what those beneficiaries receive can be kept out of court proceedings and public view.
Does a conservatorship and a trust both protect a beneficiary? They do. Both have requirements that the person in charge of the money does a beginning inventory and regular accountings.
00:15:51
Michelle Dexter: The difference is that with a conservatorship, those accountings, inventory, and budget have to go through the court process. The accountings get approved by the court accountant; there is a hearing and a whole approval process. When you’re doing that for a trust, it can be more informal. The trustee still has fiduciary duties to the beneficiaries to make sure they’re using the money for the beneficiary’s best interest, but it’s not as intense or court-controlled.
In terms of termination, for a conservatorship—assuming they have capacity at 18—they’re going to file a petition and get a court order to terminate the conservatorship and receive those funds. For most of us, we recognize that most beneficiaries’ brains aren’t fully developed until closer to 25. I have some clients that want that to be pushed out even further.
00:16:59
Michelle Dexter: I have an occasional client that says, “My beneficiary is really mature, and I want that brought down to 21.” But I think for most of us, we can agree that 18 is pretty young to get a significant amount of money.
Additional things to consider: In addition to the costs for the person who wants to be appointed conservator, there’s an attorney for the court and a court investigation, both of which come with expenses. Conservatorships also have more limited investment opportunities. The court is going to want that money to be making some money, but you can’t be very risky with it. You’re somewhat limited in what your investment opportunities are.
A trust still has fiduciary duties as the trustee to make sure you are smartly investing, but you have a little bit more of an investment opportunity.
00:18:09
Michelle Dexter: Regarding access, when you’ve got a conservatorship for someone under 18, typically those funds are just restricted until that person turns 18. If the conservator determines they need to access that money, they’re looking at bonds, budgets, and annual accountings. In addition, the court isn’t really keen on spending a kid’s money for things that a parent or guardian should be paying for.
With a trust, we have more flexibility. If the beneficiary is older than 18, you can still choose to limit their access to the funds without declaring an incapacity. Again, if we say, “You’re not going to have direct access until you’re 25,” that’s something we can only do through the trust.
Guardianship and Custody
Michelle Dexter: When we have minor children, the other concern is guardianship—who’s going to take custody and handle medical decisions for the children.
00:19:10
Michelle Dexter: I still have one minor child; he’s almost 17. Without an estate plan, I’m basically leaving it to the court to decide. With an estate plan, I can designate who will have priority for custody if I’m not available.
With an estate plan, you can have a testamentary appointment in your will that allows the guardian to file an acceptance and effectuate that guardianship. You can also choose people for temporary and permanent guardianship situations to help avoid that child going through Child Protective Services (CPS). You can have a preference for priority, but the law says that if that minor child is 14 years old, they can also object to that appointment.
00:20:15
Michelle Dexter: They can start to participate in the conversation at that point. As a caveat, if you’ve left nothing in writing, it’s going to require a court hearing—maybe several—and potentially a trial if several people are competing for the position. When there is uncertainty about who the child is going to go with, it can be very stressful on the child. Having the estate plan laid out can help reassure them during a really stressful time.
In addition, when there’s no clear front-runner, it can result in the children going to CPS and staying in their custody while the dispute is being resolved. For most of us, that is the worst-case scenario.
00:21:27
Michelle Dexter: So, people with young children should really consider having documentation in place. Now, the person who is the guardian and the person who is the trustee might be the same person or different people. It’s a personal decision. You might want the guardian to have full access to the money to provide the lifestyle the child is accustomed to, or you might prefer checks and balances to make sure the guardian isn’t overspending or misusing money intended for the child. Sometimes the person I would want as a guardian isn’t necessarily a strong financial person, so that may be another reason to split up those duties.
Special Needs Planning
Michelle Dexter: Special needs is another thing you definitely want to take into consideration for children, grandchildren, or nieces and nephews.
00:22:39
Michelle Dexter: If they are born with neurodivergent issues, physical disabilities, or mental health issues, you want to figure out how to set that up so they don’t get disqualified from any benefits. Special needs generally means they qualify for a government benefit that helps pay for health expenses, food, or housing. We don’t want them to lose those benefits as a result of receiving a distribution from your estate. If you don’t plan accordingly, they will be disqualified, they’ll have to spend down the inheritance, and then they’ll have to re-qualify.
00:23:49
Michelle Dexter: Understanding what types of disabilities your beneficiaries may be dealing with is important. A Special Needs Trust is set up to help avoid losing government benefits. A lot of times these are what we call “first-party” special needs trusts, which allow a government agency to get reimbursed for expenditures made while the trust was in place. These are often created by people receiving an inheritance who don’t want to be disqualified; they create the trust with the promise that when they die, anything left is going to repay the government.
00:25:06
Michelle Dexter: When a person creates a Supplemental Needs Trust for a third party (you creating it for your beneficiary), it avoids the loss of government benefits without a reimbursement expectation. The government doesn’t expect to be repaid out of a third-party trust. You can’t set this up for yourself; you’ve got to set it up for someone else.
This is an important thing to consider because intentionally knowing those funds are going to go to a government agency instead of your successor beneficiaries is not protecting your legacy. We have a lot of kids nowadays on the autism spectrum—some very high functioning, some lower.
00:26:17
Michelle Dexter: It’s important to understand your options because they may be young enough that you don’t know how high-functioning they’re going to be when they inherit. Have that conversation with your attorney and the parents to understand the expectations.
Life Insurance and Retirement Accounts
Michelle Dexter: Regarding life insurance: A lot of times life insurance has beneficiaries named specifically, and then a contingent beneficiary. If proceeds are owed to a minor or an incapacitated person, the insurance company is going to require a conservatorship.
00:27:26
Michelle Dexter: For those under 18, a conservator will receive those proceeds and sit on the money until the kids are 18, generally in a fairly low-interest account. Similarly, if an incapacitated beneficiary is receiving government benefits, this insurance money may disqualify them without supplemental needs language in a trust.
If we can name the trust as the beneficiary, that helps us avoid a conservatorship and the loss of government benefits. It also allows for better contingency plans. Sometimes those beneficiary forms only allow a first and second choice.
00:28:34
Michelle Dexter: If you have the trust named as the beneficiary, those funds come into the trust and are distributed pursuant to your contingency plans. The trustee can put the funds into a better investment vehicle, like a higher-rate CD, with more flexibility than a court-restricted conservatorship. It also allows management for beneficiaries beyond age 18—up to 25 or older.
00:29:35
Michelle Dexter: Retirement accounts are similar. If the beneficiary is under 18 or incapacitated, a conservatorship is needed. Under the SECURE Act, minor children have until they turn 21 plus 10 years to pull that money out of the accounts. You definitely want to consider the tax consequences of that.
For typical healthy beneficiaries, most will have a 10-year window to empty the account.
00:30:35
Michelle Dexter: Spouses or those chronically ill can have a longer “stretch.” It’s important to know how your beneficiaries fit into this and if you need protections in place, like supplemental needs language. For minor children, you might want to do a Standalone Retirement Trust to manage it without a conservatorship.
Beneficiary Protected Sub-Trusts
Michelle Dexter: One other thing to consider for any beneficiary is a Beneficiary Protected Sub-Trust. This allows each beneficiary to receive their share in a protected sub-trust.
00:31:43
Michelle Dexter: When we create these, there’s a wide range of how distributions are made. On one hand, I might not be worried about their ability to handle money, so I’m okay with them having direct access. However, I like the fact that the money in that trust is protected from a dissolution of marriage (divorce), creditor issues, or liabilities.
Moving over a bit, maybe it’s more restrictive. Maybe they can’t manage it themselves until age 25, 30, or 35. Maybe we limit the use to education or require them to be employed.
00:32:40
Michelle Dexter: On the far other end, they are never their own trustee. We may have drug testing requirements or very strict restrictions. You can also designate who receives the assets if the initial beneficiary doesn’t spend it all. If I say “to my child,” but if they don’t spend it, then “to their children” or “back to their brothers.” You can set it up to be very specific for Plan A, Plan B, and your worst-case scenario. As mentioned, these sub-trusts protect against divorce, creditors, and liabilities.
00:33:39
Michelle Dexter: Sometimes you don’t expect those things to happen, but people and marriages change. You want to be cognizant of how much they are inheriting and how they are with money.
Age makes a difference too. For young adults (college age through their 30s), they may not have their own assets yet or be financially savvy. They may have debt—student loans or credit cards—and they may be starting a family.
00:34:40
Michelle Dexter: You want to consider your “Plan B” if a young beneficiary passes before spending the money. Outright distribution versus a sub-trust can have different answers. If I give everything to my 22-year-old son outright, he can put it in his bank account and designate where it goes. If I put it in a sub-trust and he passes at 24, I can direct where the remaining money goes.
Consider their financial maturity. Are they living paycheck to paycheck? Are they going to be influenced by friends who want to party?
00:35:37
Michelle Dexter: Consider your beneficiary “depth chart.” My son plays football, so I call it that. I have three sons, so my depth chart is three children. As they have families, it increases. If my three kids each have three kids, I go to 12 people. If a client only has one child and no grandchildren, we really need to plan for what happens if that child isn’t there. Plan B might be siblings or a charity. You’ve worked hard for this money; we don’t want it going places you didn’t plan for.
Middle-Aged and Older Beneficiaries
00:36:30
Michelle Dexter: When we’re talking about middle-aged beneficiaries (40s, 50s, 60s), some may have their own wealth. If they are high-income earners and receive pre-tax IRA benefits, that money is taxed at the highest rate. Is that the smartest decision?
If they are struggling financially, is it responsible to give a large inheritance outright? You also want to consider if it’s time for distributions to grandchildren instead.
00:38:39
Michelle Dexter: Is your beneficiary on their first marriage or their third? In a sub-trust, those funds stay with your child, not an ex-spouse. Regarding retirement accounts, you might talk to your advisor about Roth conversions to minimize the taxes paid by your heirs.
Also, are the grandkids smart with money? We don’t want them to waste the hard-earned legacy you scrimped and saved for.
00:39:48
Michelle Dexter: For older beneficiaries, their children may be retired. If they are retired, are they financially stable? If they are working part-time to pay expenses, maybe they shouldn’t get a big chunk of money outright.
Do they have health issues? If they are strategizing for Medicaid, inheriting money outright will force them to “spend down” before qualifying. I had a case recently where a beneficiary had a stroke 10 years ago. The parents never updated their documents, and now that child is receiving government benefits.
00:41:48
Michelle Dexter: Because the parents didn’t update the plan to include a supplemental needs trust, the inheritance now disqualifies the child from benefits. The government wants you to use your own money to pay expenses, which is logical, but had the parents set up the trust correctly, the child could have kept their benefits and used the inheritance to improve their quality of life. Review these documents periodically.
00:42:50
Michelle Dexter: If you don’t have a relationship with your grandchildren, do you want your legacy to continue to people you don’t know? Or would it be better served by a charity? Charities are a great way to carry a legacy forward—through a scholarship, a park bench, or a specific cause.
00:43:57
Michelle Dexter: Don’t assume everyone is doing well. Sometimes it’s an awkward conversation, but you have to know what’s going on. In Arizona, for Medicaid, the resource limit is about $2,000. If they inherit $10,000, they are disqualified. They’ll have to spend it down and then re-qualify, which is a painful, long process.
Summary of Estate Planning Options
Michelle Dexter: When locking down your legacy, if you do nothing, your family may be forced into court to manage your affairs. There will be no directions for minor or incapacitated beneficiaries and no contingency plans.
00:46:08
Michelle Dexter: A simple will is just directions to the court; it doesn’t avoid court filings. You’ll still need financial and healthcare Powers of Attorney to avoid guardianship and conservatorship during your lifetime.
The trust plan is the first best step. It avoids probate, guardianships, and conservatorships. It’s a well-rounded plan.
00:48:07
Michelle Dexter: You can add protections for beneficiaries and supplemental needs language. You can be liberal with distributions or very conservative—whatever fits your concerns.
00:49:06
Michelle Dexter: Supplemental needs trust language specialized for the trust avoids disqualification from government benefits and avoids reimbursement to the government.
Closing
Michelle Dexter: We’re getting to the end. If anybody has questions, I’m happy to answer them. Please keep in mind this is a public forum, so keep your questions generic. This webinar will be on repeat, so we don’t want to disclose personally identifiable information to the worldwide web.
00:50:26
Michelle Dexter: There’s a chat feature in the lower right-hand corner, or you can unmute yourself.
Well, listen, we thank you so much for joining us. We hope you learned something new. Feel free to reach out to us at Keystone Law Firm. Our email is info@keystonelawfirm.com. We have a whole series of webinars—some on simple estate planning, some financial concepts by Carie Gutman, and some more complex topics by Francisco Sirvent regarding irrevocable trusts or asset protection.
If you have an idea for a webinar, please reach out. We appreciate your time today. Have a fabulous day. Bye!
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