As a parent to young children, your days are often a whirlwind of activities—work, school drop-offs and pickups, bedtime routines. Adding estate planning to the mix might feel overwhelming. Still, when it comes to protecting your children’s financial future, it’s worth making the time. One of the most effective tools to ensure your kids’ financial security is a trust fund.
If the term “trust fund” brings images of lavish wealth to mind, think again. Trust funds are practical, accessible tools for parents of all income levels. They allow you to protect and manage assets for your children, particularly if they’re underage.
Here’s what you need to know about trust funds and why they might be the right choice for your family:
What Exactly Is a Trust Fund?
A trust fund is a legal arrangement that allows you (the grantor or settlor) to transfer assets—such as money, property, or investments—into a trust. These assets are managed by a trustee, who oversees the distribution of the assets according to the terms you’ve outlined. The trustee ensures the assets are used to benefit the trust’s beneficiaries.
Unlike a will, which simply outlines how your assets should be divided, a trust gives you more control over when and how your assets are distributed upon your passing. This control is particularly important when your beneficiaries are too young to manage finances responsibly.
What Happens to Your Assets When You Create a Trust?
Creating a trust fund does not necessarily mean you relinquish control over the assets. How the trust works during your lifetime and upon your passing ultimately comes down to your goals.
For instance, you may opt for a trust which allows you to retain complete control over your assets during your lifetime. The trust can be designed to enable you to use the assets in the trust as you wish, add and remove assets from the trust at any time, and adjust any aspect of the trust as your family circumstances change.
There are various types of trusts and near-endless ways to design them. This is why it’s crucial to work with an attorney experienced in estate planning to walk you through the relevant options and ensure the trust works as you intended.
Benefits of a Trust Fund for Underage Beneficiaries
As a parent, your primary concern is likely ensuring that your children’s needs are met—both now and in the future. A trust fund can help with that in several ways.
Control Over Distribution: A trust allows you to specify how and when your children will receive their inheritance. For example, you might stipulate that funds be used for education, healthcare, or other specific purposes. You can also delay full access until your children reach a certain age, ensuring they’re mature enough to handle significant assets.
Financial Protection: Without a trust, assets left to underage beneficiaries will be managed by someone the court appoints until they turn 18. Once they turn 18, they gain complete control of the assets—ready or not. A trust protects the assets, allows you to choose who manages the funds, and ensures they’re used responsibly and according to your wishes.
Asset Protection: A trust can be designed to protect the assets from external claims, such as creditors, a divorcing spouse, and lawsuits, offering long-term security for your beneficiaries.
Avoiding Probate: Assets placed in a trust bypass probate, a court-supervised legal process used to validate your Will, collect your assets, value your estate, settle debts, pay various taxes, and oversee the distribution of your assets. The probate process can be lengthy, time-consuming, and expensive, leaving fewer assets for your children to inherit. By avoiding probate, you can ensure the right people can assess your assets immediately so they can use them to care for your children.
Provide for a Child with Special Needs: If you have a child with special needs, a supplemental needs trust or special needs trust can ensure they’re financially supported without jeopardizing eligibility for government benefits.
Why Work With an Attorney
There are several types of trusts to consider, and the right one for you and the right way to set it up will depend on your family’s circumstances and goals.
An experienced attorney can help you select the right trust for your situation, navigate the legal requirements, give you confidence in those you choose for various roles, and create a trust tailored to your family’s needs and specific goals.
We Are Here to Help
As a parent, your time is limited, and your focus is often on the present. But taking the time to set up the right estate plan is one of the most important investments you can make in your children’s future.
With the proper guidance, you can create a trust that protects your children, reflects your values, and gives your family lasting stability.
Contact our office to speak with one of our experienced estate planning attorneys. Because at the end of the day, the best gift you can give your kids is the assurance that their future is secure no matter what happens.
