Everything You Need To Know About Starting A Trust Fund For Your Child
Part of a parent’s financial responsibility revolves around giving your children some money to set them up for a good life. This doesn’t mean you throw money at them all the time and spoil them, it means you set something up in their name to keep putting money into. As such, many of you may think about setting up a trust fund. In this post, we’ll cover all the key points about setting up one of these funds for your kids.
What is a trust fund?
In simple terms, a trust fund is a fund you set up for your kids to use later in life. If you become incapacitated or sadly die, then they will have all the money in the trust to use. You can also put other assets in the trust, like property or other investments. Think of it as the ultimate emergency fund for your child.
How do trust funds work?
There are so many different elements of a trust fund that make them quite hard to understand. If complications arise, then there might be trust litigation to deal with, and there are so many other terms to be aware of. Mainly, your assets will be put in a trust that you have control over. You decide what happens to the money, and when your child will get it. You also have to name a trustee, which is someone that will take control of the trust if you’re unable to until your child turns 18. When they do reach this age, then all the money from the trust goes to them.
Some key terms to be aware of:
- Grantor: This is you, the person setting the trust fund up
- Beneficiary: This is your child or whoever will benefit from the fund
- Trustee: Someone you know and trust – they take control of the trust if you pass away, until your kids are old enough
What are the pros and cons of setting up a trust?
Mainly, the pros are that you secure a lot of money away in a fund that can’t be touched until a specific date. This means that you keep adding to it over a lifetime, so your kids are left with a lot of money. Also, it protects your children in the event that you become incapacitated or die suddenly.
However, the key downside is that this isn’t a fund where you can just dip in and out of it as you please. If you want to set your children up with a college tuition fund, then this isn’t the option for you. Be aware that it’s largely a form of asset protection to help your kids when you’re gone!
Overall, this should deliver some of the key information on setting up trust funds. You can do this by contacting any of the trust fund providers in your country. A quick Google search will show you the options. If you’re looking to set up more of a savings account for your kids, then don’t opt for a trust fund. Instead, speak to your local bank and look at the savings account options they have available.