Most parents work hard and save in hopes of passing assets on to their children when they pass away. When you have been successful and have a large estate, how to best transfer your wealth is a question that you may be considering. One option is a trust fund. Some advantages of a trust fund for your child include:
- Possible reduction of estate taxes in the future
- Possible reduction of gift taxes in the future
- Probate avoidance
- Protection for loved ones with special needs
- Protection from lawsuits or creditors
- Protection against the inheritance being squandered
How Do I Set up a Trust Fund for My Minor Child?
To set up a trust for a minor child, you must:
- Specify the purpose of the trust:Several questions must be answered as you begin the process of setting up a trust for your child. What is the trust intended for? Is it for college tuition? Is it a tool to transfer real property? Is it for multiple children or just one? Re there certain assets that you want to go to certain children? The answers to these and other questions will help your estate planning attorney determine what type of trust best fits your needs.
- Determine how the trust will be funded: Will the trust hold real estate? Investments? Bank accounts? Again, the answers will help your trust attorney guide you to the right options.
- Name a trustee: The trustee you choose will be responsible for managing the assets in the trust and distributing them to beneficiaries according to your instructions. This should be someone you trust who has the intelligence and dedication to administer the trust in the best interests of your child or children.
- Create the trust and trust documents:Drawing up the documents that will create your trust fund and determine its parameters is a task best completed with the help of a skilled and experienced estate planning attorney.
- Fund the trust by transferring assets into it: Once the trust is created and all the documents are in place, assets must be transferred to fund the trust. In some cases, this simply involves attaching a list of assets, but in some cases, ownership documents like deeds or titles must be updated to reflect the trust as the owner.
Can I Name Myself as the Trustee?
The grantor of the trust can also be the trustee, but since you have set up this trust, at least in part, to manage your children’s inheritance, you should name a successor trustee to take over once you pass away. It is wise to choose someone significantly younger than you are so that they are more likely to be in good mental and physical shape to administer the trust if you di in old age.
How Do I Know if a Trust Fund is a Good Option for My Family?
Estate planning, wealth transference, and tax planning are complicated issues that can be difficult for a layperson to understand. A skilled estate planning attorney has the education and experience to help guide you in deciding whether a trust fund for your minor child or children is in their best interests and yours.