Trust funds definitely get a bad rap.
Contrary to the gossipy headlines about the Hollywood set, these funds aren’t just reserved for spoiled brats who don’t want the daily 9-to-5 to cut into their party lifestyles.
Actually, the decision to use a trust for a child—especially when that child is a minor—can be a very shrewd and wise move that will set them up for future success as adults.
Trusts are tailored to fit the trustor’s wishes, and that includes identifying the beneficiaries as well as setting down the requirements for these beneficiaries to receive any assets from the trust. Setting up these requirements when a child is involved is invaluable because the alternative—that you die without a trust and your child is under 18—could be disastrous.
Just imagine: Without a trust to organize and carefully distribute assets to your child, he or she will inherit all of your estate—a house, savings, life insurance money, other assets—immediately at the age of 18.
Do you remember what you were like at 18? Would you have known how to responsibly handle a huge sum of money at that age?
If you answered yes, you are definitely in the minority. Most people are not equipped in their teens to deal sensibly with significant assets (let alone good hygiene)—and they’re also liable to fall prey to so-called friends or relatives who will take advantage of them or else squander the money away on foolish purchases.
That also applies to a parent’s life insurance policy. In the event of death, it’s a good idea to have your trust serve as the contingent beneficiary of that policy instead of directly designating your young child. Having the money from that policy go into the trust means it will be kept safe until the child is older and ready to handle the responsibility of such a large sum of money.
Ok, you say, if I don’t have a trust but I’ve designated someone as my child’s guardian, that will still be enough, right?
Maybe. Maybe not.
Even a loving family member who fills the role of your child’s guardian may innocently borrow from your child’s inherited assets—the temptation is hard to resist, especially since the terms are much better than any bank’s—with every good intention of planning to pay the loan back … and never doing it.
The only way, then, to guarantee a certain level of protection for your child is with a trust. Trusts can protect assets while a child is under 18 and, if the trustor decides, well into the future, too.
Don’t Know What to Do?
Do you have young children? Do you want to protect your assets for them? The best place to start is with the Law Offices of Christopher B. Johnson.
Johnson and his team are highly versed in setting up trusts involving children, and they can help you draft a trust document and consider scenarios that people rarely think about when they think about the future.
“What happens to your child’s assets if you and your spouse divorce? Few people think about that,” says Johnson. “Without a trust, all those assets will turn into marital property and become subject to sharing with your ex-spouse instead.”
No one with young children ever wants to imagine that they’ll leave them before they’ve grown into adults. Sure, it’s an emotionally-charged nightmare scenario, but it’s important to consider such situations and to make sure your assets go in the right direction if you can’t be there to make sure they do.
Let Johnson and his team walk you through the process and determine the estate planning strategy that’s best for you.