You’re planning on leaving some money behind when you die, and that’s understandable – but how do you plan to pass it on to your kids? Will it just go into their own accounts, or will you also create a trust fund so they have access to the money while they’re growing up? If so, what kind of trust fund should you set up? How do you even go about setting up this kind of account? Here are some helpful tips on preparing the perfect trust fund for your children.
Why Create a Trust
A trust fund is an excellent way to provide security and peace of mind to your children, grandchildren, or other beneficiaries. A trust can also be an effective estate-planning tool because it allows you to transfer property after your death without the need for probate.
As a trustee, you are responsible for managing the assets according to the terms of the trust agreement and making sure that they are distributed according to the instructions in the trust document.
If you have minor children as beneficiaries, then you’ll want to make sure that they receive their share when they reach age 18 or 21 (depending on state law). You’ll also want to make provisions for their education expenses and any needs that may arise later in life.
Where to Store the Assets
A trust fund can be created in many different ways, with the most popular being either an irrevocable trust or an inter vivos trust. An irrevocable trust is where the assets are transferred to the trustee who then manages them and distributes them according to the instructions left behind by the grantor.
An inter vivos trust is when you create it while you’re still alive, meaning you can change or revoke it at any time (with some restrictions). The main difference between these two types of trusts is that with an irrevocable trust, once you transfer your assets to your trustee they are out of your control and cannot be changed.
If this doesn’t sound like something that would work for you, an inter vivos trust might be right for you.
Documents You Need
Setting up a trust fund is an excellent way to provide your children with financial stability. The key is to set it up early and make sure it’s well-funded. There are several documents you’ll need to create, including the trust document and the Declaration of Trust.
You’ll also need to name trustees who will be in charge of the money and set up beneficiaries or those who will inherit the assets after your death. You’ll want to make sure you update these documents as your children grow older, especially if they marry or have children themselves.
For example, once your son has his first child, he should change his beneficiary from himself to his new son or daughter. It’s important that you don’t forget about this process!
Who Should Have Access To The Assets
This is where you get to decide who will inherit your assets. The options are:
▪ Entirely to one individual (called the outright beneficiary)
▪ To more than one individual, equally, with rights of survivorship
▪ To more than one individual, unequally with rights of survivorship
▪ Entirely to your spouse and children; or
▪ Entirely to your spouse and other descendants.
Rights of survivorship mean that when one person dies, the others take over their share. Rights of survivorship can be limited so that if someone has died before you did and there’s only one surviving child left in the group, he or she would not automatically receive everything.
If this happens, his or her share would go into what’s called an Inheritance Annuity which pays out a fixed sum each year based on life expectancy tables set by law. It may also specify how often payments should be made (for example monthly).
Working with an Attorney, Accountant, and Investment Advisor
While there are many options available to help you provide for your children in the future, it is important to do some research before you make any decisions. It’s best if you speak with an attorney, accountant, and investment advisor before deciding on any course of action.
These professionals can advise you on how to set up a trust fund that will serve your child’s needs and help them reach their potential. You can also learn about which types of assets would be appropriate for each type of beneficiary.
For example, if your child has a disability or mental illness, you may want to work with an estate planning attorney who understands the need to protect these beneficiaries from fraud and other financial exploitation. An accountant or financial planner will be able to offer guidance on tax implications and financial management when working with trusts.
Working together, these advisors can help ensure that your family has the means needed to maintain their lifestyle after you’re gone while also protecting what should belong solely to your children–their inheritance!
Including certain provisions in your trust documents
If you plan to create a trust fund for your children, you must decide on the purpose of the trust and the assets you wish to give. Once you have decided on the purpose of the trust, you can include certain provisions that can help you achieve that purpose. For example, you can include instructions regarding how assets will be distributed or whether beneficiaries will receive money for their college educations.
You should also consider whether you want to include a clause that will allow your children to access certain trust funds as they reach particular milestones.
There are many benefits to including provisions in trust documents for your children. First, trust funds provide asset protection for your children. If your spouse becomes disabled or passes away, you may want to designate someone to manage these assets. You can also choose a trusted individual to take care of your minor children if you become incapacitated.
Lastly, you may want to name a healthcare power of attorney to make health decisions on your behalf, as I mentioned before. A living trust is different than a will. This type of trust lets you name beneficiaries and administer assets, and you can update the terms as your circumstances change.
It also allows you to name guardians for minor children. In addition, revocable trusts give you the flexibility to decide when your children are old enough to receive their inheritances and who will administer it until they reach age 18.
A trust fund is the best way to transfer wealth to your children, but it is important that you have an experienced estate lawyer to help you set up the trust. It will take time and effort on your part, but in the end, the benefits are worth it.
With a trust fund, your children will be less likely to face financial hardships, they’ll know they’re loved unconditionally, and they’ll have something that can’t be taken away from them.