By the law firm of Lina A. Clark
A minor’s trust is designed to hold property and assets until they reach the age of majority to receive it. These trusts usually provide instructions on how to hold the money, property, or other assets until the minor reaches distribution age.
Through the Trust Fund for Minors, you can ensure the financial security of your child after your death. You will also decide what will happen to the assets in the trust if your child, the beneficiary, dies.
Plus, you may be able to avoid having to pay gift taxes on the fund. Minor trusts often provide parents or guardians with ways to make sure that a child spends money or allocates assets the way you intend.
Your minor trust can be created with the following intentions:
n Managing financial distributions
n Determine when the beneficiaries will receive the funds
n Determine how funds will be allocated
State what will happen to the trust in the event of the death of the minor
You may decide to create the trust via a will or a living trust. You will leave the property to your child, but you will write in a judgment stating something that if the beneficiary was still a minor at your death, the property should be placed in a subordinate trust account, which would be assigned to a trustee.
As mentioned, the guardian will take care of the account on behalf of the child until the child is at least 18 years old. You’ll choose the end date of the trust, which means you can set any age you want, although you should know that by the time kids reach their early to mid-30s, they’ll be as mature as they ever will be.
You can add details regarding the terms under which your child is allowed to use the money and assets, such as how much they are allowed to access as well as how often parts of the accounts are spent. One of the main benefits of a subordinated credit is that you can set it up to offer compensation in increments instead of releasing it entirely as a lump sum.
This distribution method can ensure that all the money is not spent immediately. For example, you could allow a portion of the assets to be distributed when your child turns 25, while another portion is made available on their 30th birthday, followed by the release of the remaining funds or assets when they turn 35. You and what you think is best for your child.
Funds can be especially helpful if your child has a disability and you anticipate that he or she will need to pay for expensive medical treatment, rehabilitation, or customized diets throughout his or her life. Ultimately, setting up a trust for a minor beneficiary can be a way to ensure that the inheritance you leave to your child will benefit.
Keep the child protectedEstablishing a minor trust account is a way to ensure that the money you set aside for your child will benefit your child and not the guardian you have chosen to act as the guardian. This means that a trust account will allow you to direct the decisions and spending habits of the trustee even after your death.
You can dictate how the money is spent, whether it is for the general benefit of the minor or for expenses such as housing costs, tuition and healthcare fees. You can also decide to leave all decision-making duties to the trustee and his or her discretion.
Plus, you can even decide what happens with any remaining trust funds in the event of your child’s death. For example, you could explicitly state that any remaining money should be distributed to a blood relative, such as a grandchild, rather than to someone who married into the family, such as the surviving spouse of your child.
Alternatively, you can provide the beneficiary with more control by giving them additional powers or rights over the trust and how it operates. This may include allowing your child to choose who will be the future beneficiary of the trust in the event of your child’s death. You can even allow a child to become a co-trustee by stating so on your trust document.
Of course, the details of such a fund are complex, and you need to think about the long-term ramifications of your decisions. Work closely with legal and financial professionals who have experience drafting details and establishing trusts for minors.
From the law firm of Lena A. Clark, 129 W. Patrick St., #11, Frederick; lenaclarklegal.com