Do I Need to Set Up a Trust for My Kids?

Summary

Ramsey Everyday Millionaires
Episode: Do I Need to Set Up a Trust for My Kids?
Date: April 24, 2026

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Episode Overview

This episode focuses on estate planning for parents, specifically whether it is necessary to set up a trust for minor children. The discussion is driven by a listener call from Jill, a divorced mother of minors with a substantial net worth. Dave Ramsey provides detailed advice drawn from his own experiences, outlining practical estate strategies to protect children and manage assets responsibly. The hosts also encourage intelligent, intentional financial planning and commend listeners for their diligence.

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Key Discussion Points & Insights

Jill’s Situation and Main Question

• [00:20] Jill, a listener from Dallas, asks for advice on protecting her assets for her minor children. She is divorced, owns a paid-off house, and has nearly $4 million in net worth (mainly mutual funds and retirement accounts).

“I've heard you say maybe an LLC or if you're raising smart kids, then you don't necessarily need a trust. But I have minors, and I'm just curious what I should do.” – Jill [00:20]

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Dave’s Personal Approach to Estate Planning

• [01:04] Dave explains his approach when his children were minors:
  • Set up a will specifying that a trust ("children's trust") is created upon death.
  • All assets would flow into that trust.
  • The will provides detailed instructions to the trustee for asset management.

“The trust is formed upon death, and it's just a children's trust. And whatever you call it...all of your assets are dumped into that trust. And then you leave instructions to the trustee of how you want those assets handled.” – Dave Ramsey [01:16]

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Structuring the Children's Trust

• [01:57] Key recommendations for how the trust should function:
  • Income from the trust provides support (like child support payments) to the guardian for upbringing expenses.
  • Provisions for using trust money for college, first car, or major medical events.
  • Otherwise, assets remain in trust, growing until children reach adulthood.

“A good, healthy child support payment goes to the guardian to take care of the kiddos while they’re minors. ... The money was just going to be sitting there growing, okay? And then when they turn 18, their portion of the assets would be turned over to them.” – Dave Ramsey [01:57]

• [03:07] For larger estates, Dave advises a staggered distribution:
  • At 18, children receive a portion.
  • The remainder is distributed at age 25, to avoid overwhelming young adults.

“Because we didn’t want to dump, you know, millions and millions on a freaking 18 year old.” – Dave Ramsey [03:07]

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Asset Management and Planning for Growth

• [03:32] Specific investment instructions can be included, such as investing in four types of mutual funds or maintaining certain real estate.
• Trustee’s discretion can be limited to prevent overly conservative investment choices.

“We dictated how the money in the trust was to be handled… so the trustee can’t get all conservative and put it all in CDs or something.” – Dave Ramsey [03:32]

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Questions About Transferring Assets Before Death

• [03:38] Jill asks if she should title the house in a trust now.
  • Dave advises against, stating that all assets should be transferred to the trust upon death, not before.

“Not now, no.” – Dave Ramsey [03:42]

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Adjusting Estate Plans As Children Mature

• [03:50] The plan can (and should) be reviewed and restructured as children reach adulthood and demonstrate competency.

“You do that based on whether or not they're going to be competent adults and whether this money is going to be a blessing. Because you give money to an incompetent, it's not a blessing.” – Dave Ramsey [03:50]

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Broader Estate Planning Considerations

• [04:13] Once children are grown, estate structure shifts toward risk management and minimizing estate taxes.
• Reference to changing plans as family and financial circumstances evolve.

“All of our structure today is all just built around risk management and around keeping the stinking government’s hands off of it upon death.” – Dave Ramsey [04:13]

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Encouragement & Recognition

• [05:01] Co-host and Dave commend Jill for her intentional financial stewardship and for protecting her children.

“Good on you, Mom. You know, great job with your financial situation. Just wanted to let you know you’re a real hero and they’re going to appreciate that someday to be a single mom in your situation.” – Co-host [05:01]

“Great job being intelligent, intentional and all of that. There’s so much wisdom there. Well done.” – Dave Ramsey [05:12]

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Notable Quotes & Memorable Moments

• "Because you give money to an incompetent, it's not a blessing. Yes, it magnifies their incompetence." – Dave Ramsey [03:50]
• "We even put in ours... the money in the trust was to be handled and what it was to be invested in." – Dave Ramsey [03:32]
• _"Good on you, Mom. You know, great job with your financial situation." – Co-host [05:01]

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Key Timestamps

• 00:20 – Jill outlines her situation and question.
• 01:16 – Dave describes the children's trust structure.
• 01:57 – Recommended use of trust income and principal.
• 03:07 – Advice on staggered inheritance.
• 03:32 – Detailing investment instructions for trustees.
• 03:42 – Answer to question about putting the house in trust now.
• 03:50 – Adjusting plans when children are adults.
• 04:13 – Discussion on estate planning after children are grown.
• 05:01-05:12 – Hosts praise Jill's financial responsibility.

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Conclusion

In this episode, estate planning for parents with minor children is explored in depth. Dave Ramsey offers actionable strategies, emphasizing the importance of creating a trust that is triggered upon death, with clear, detailed instructions to safeguard assets for minors. The conversation provides both practical steps and reassurance for listeners, highlighting that estate plans should be revisited as children grow and financial circumstances evolve. The episode closes with encouragement for parents taking thoughtful steps to secure their children's futures.

Transcript

[A]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor Jill is with us. Jill is in Dallas. Hi, Jill. How are you?

[B]

Hi. I'm good. How are you doing?

[A]

Better than I deserve. What's up?

[B]

I have a question about a trust. I've heard you say a couple different things and I was just curious what you would do in my situation. Okay. I've heard you say maybe an LLC or if you're raising smart kids, then you don't necessarily need a trust. But I have minors, and I'm just curious what I should do. I have a house and I have a house that is paid for. And then I have some mutual funds in my IRAs and stuff like that.

[A]

Okay. And so your net worth is a million or so.

[B]

It's close to 4 million.

[A]

Oh, good for you. Well done. Very well done.

[B]

Okay.

[A]

What we did when we were at your stage and we had minor children was we set up a will. And the will.

[B]

I'm sorry, I'm sorry. I should also add, I'm divorced, so.

[A]

Okay.

[B]

My. My kids are taken care of in the form in the fashion that they will go to their dad if something happened to me. I just want to take care of my stuff for them.

[A]

Okay. Yeah, that's fine. So you can do the exact same thing then. So the actual guardian would be your ex. But then what do we do with your stuff if you die while they're minors? So what we had set up on ours. We're minors, was the trust is formed upon death, and it's just a children's trust. Very simply, Jill's kids. And that's the trust. And whatever you call it, whatever you want to call it, but it's a children's trust while they're minors. And all of your assets are dumped into that trust. And then you leave instructions to the trustee of how you want those assets handled. I'll give you a couple of things we did, and you could choose to add those or not add those. Okay.

[B]

Okay.

[A]

One was the trust. The income generated by the trust while they're minors. A good, healthy child support payment goes to the guardian to take care of the kiddos while they're minors. So I don't want the him to be, in this case, your ex to be stressed at all with clothes and, you know, food and so forth for having all the kids now full time. Okay.

[B]

Right.

[A]

That's one thing. The second thing we said was, okay, you can use some of the money from the trust. When you go to college and pay cash for college, you could use it for the purchase of your first car. A minor amount for that. You could use it if there was a major medical event and you needed to pull some out in addition to the monthly income to cover medical expenses for the child while they're minors. But other than that, the money was just going to be sitting there growing, okay? And then when they turn 18, the, you know, their portion of the assets would be turned over to them. That's how we had it set up later on we modified it because it's got to be a little larger amount of money. We said, okay, at 18 you get X amount and at 25 you get the rest. Because we didn't want to dump, you know, millions and millions on a freaking 18 year old. Okay?

[B]

Right.

[A]

So that's how we handled it until they were grown. When they were grown, we changed everything, of course, because they're not minors anymore. And we even put in hours. We dictated how the money in the trust was to be handled and what it was to be invested in. Like the four types of mutual funds we talk about. And there's this piece of real estate and it's paid for and it just stays in there, can't be sold. And so the trustee can't get all conservative and put it all in CDs or something.

[B]

What about, should I put my house in anything right now?

[A]

Not now, no.

[B]

Everything just goes upon death. And then when they both turn 18, then I can restructure everything.

[A]

Upon 18, you can dictate that the trust does X, or once they are 18 and you're still alive, then you'll change the whole thing and decide what you want to do at that point. And you do that based on whether or not they're going to be competent adults and whether this money is going to be a blessing. Because you give money to an incompetent, it's not a blessing. Yes, it magnifies their incompetence.

[B]

Okey doke.

[A]

So that's what we did. So as they grew, now we're way past that now. I mean, my youngest is 35. So you know, we're way past all that and we're way past the competency question and all those kinds of things. So all of our structure today is all just built around risk management and around keeping the stinking government's hands off of it upon death. Because the stupid government takes 55% of everything above. I think this year it's $28 million or something. So the death tax, you know, they tax you once while you're alive, they tax you again when you die. So you spend a lot of money, a lot of time keeping their hands off of it then also. But that's a different discussion than you're worried about today. Right now, you just want to make sure your kids are okay and the stuff is managed well.

[C]

And good on you, Mom. You know, great job with your financial situation. Just wanted to let you know you're a real hero and they're going to appreciate that someday to be a single mom in. In your situation.

[A]

Great, great job being intelligent, intentional and all of that. There's so much wisdom there. Well done.