Setting up a trust fund for your children can secure their financial security, including long after your death. From college funds to asset protection, trusts are a great option for any family looking to protect their wealth in the long term.
However, trust funds may not be for everyone. In this guide, we’ll make it easy to determine if they’re right for you and your family.
What Are Trust Funds?
- Trust funds are legal entities used to hold assets for the benefit of selected beneficiaries.
- Trust funds are popular types of advanced estate planning, giving the trust creator (the ‘grantor’) a chance to plan long-term.
- The benefits are far-reaching, from asset protection to long-term inheritance control.
- You may hear the words ‘trust’ and ‘trust fund’ used interchangeably.
- Trusts include grantors, beneficiaries and a trustee (the person responsible for managing the trust).
What Types of Trust Funds Are There?
There are many types of trust funds serving specific purposes, but they primarily are categorized into ‘revocable trusts’ (or ‘living trust’) and ‘irrevocable trusts’.
- Revocable trusts can be amended during the grantor’s lifetime, at any moment. You can edit the terms, and take out assets at any moment. The assets in revocable trusts are still at risk of creditors.
- An irrevocable trust is the opposite. They cannot be changed once they are formed. This allows for total asset protection but requires advanced planning to ensure your vision is firm from the outset.
Read Related: A Guide to Different Types of Trusts in Estate Planning
Should You Create a Trust Fund for Your Children?
Trust funds are not for everyone, as they require you to relinquish ownership of the assets. However, if the following benefits meet your desires then you should talk to an estate planning attorney to consider setting up a trust fund for your children.
Do You Want to Guarantee Funds for Your Kids?
Irrevocable trusts provide asset protection from creditors and legal claims. If you don’t have a trust, your assets (except for your retirement savings) are at risk of seizure by courts and creditors.
If you want to guarantee funds for your children in the future, a trust can help you. If things go wrong in life, such as through bankruptcy or business failures or lawsuits, then your assets and funds will stay safe for your kids.
Do You Want to Protect Your Wishes?
Although you can put inheritance instructions in your will, it is always at risk of being challenged by third parties or relatives that feel they’ve been wronged. Irrevocable trusts give you the chance to avoid that.
Your intentions cannot be changed once they’ve been included in the trust document. You can name your children as beneficiaries and rest easy knowing those wishes will be fulfilled.
Do You Want to Avoid Probate?
Probate is the process where a will is proved by the court, before the estate is distributed. It is often long, stressful and expensive for the surviving family members.
Trust assets avoid probate, allowing for near-instant inheritance after your death. If you want to ensure your children get funds fast, without the risk of probate disputes, then consider opening a trust fund for them.
Do Your Children Have Special Needs?
If you have children with special needs or disabilities, then they will likely need long-term care after you pass away. Special needs trusts can allow you to ensure there is a pot of money and assets set aside in their name, without restricting their government benefits eligibility.
Feel free to contact our estate planning attorneys, if you are considering forming a special needs trust in Florida.
Do You Have a Long-Term Vision for Your Family?
A trust fund can enable you to craft a long-term vision for your family, with deep control over how your estate is inherited.
With a will, everything is inherited at once when you die. But with a trust, you can choose specific terms and requirements as to how assets are distributed.
For example, you can:
- Have annuity payments made to beneficiaries on a predetermined basis.
- Provide a lump sum upon your death.
- Distribute assets when a child reaches a milestone, such as graduating college, getting married or having a child.
- Stop payments at a certain age or milestone.
This is often of great use to parents who don’t want their kids to inherit large sums of money at once. Even young adults may be overwhelmed by receiving real estate property and funds too early in life.
Trusts will guarantee that your hard work is still supporting your children and grandchildren, even when you’re no longer around.
Do You Have Intended Purposes for Your Money?
Similarly, in your trust document, you can write specific purposes for the asset distributions. These can ensure that the money is only spent on the things you want them to be.
For example, you can state that money should only be used on buying a home, college education, funding travel or long-term care.
This is particularly useful if you don’t like the idea of a child being given lump sums of money, in the fear that it’ll get misused. We’ve seen families use it to protect children with addictions and other families use it to ensure that children don’t use funds designed for dreams used on bills and other expenses.
Reasons Against a Trust Fund for Your Children
Trust funds are not for everyone, however. While trusts are not exclusively for the rich, they are often associated with wealthy families due to the legal and financial fees associated with them.
Creating a trust is not a DIY project. You will require the assistance of an Estate Planning attorney. If your family can afford such expenses, then it will be worth it to realize your long-term vision. But if you can’t, then it may be better to think of alternatives.
You should also think carefully to not make conditions too restrictive. What may seem wise now, can backfire if your children are extremely limited from obtaining funds.
How to Create a Trust Fund for Your Children in Florida
If you’re ready to take the steps to set up a trust fund for your children in Florida, then here’s how:
- Determine the purpose of the trust (such as a college fund, asset protection, special needs trust, or a long-term vision).
- Choose whether you need a revocable or irrevocable trust.
- Select which assets you want to place into the trust.
- Decide what conditions you want for each asset’s distribution, management and how it affects each beneficiary.
- Contact an estate planning attorney, to optimize your plans and ensure legal compliance.
- Draft the trust documents with the assistance of an estate planning attorney.
- Legally create the trust.
- Transfer assets into the transfer.
- Review the trust each year, if revocable.
Contact an Estate Planning Attorney in Riverview, FL Today
If you’re interested in creating a family trust, then our Florida estate planning attorneys can help. Whether you want to protect your assets, plan for college or ensure long-term family wealth for your kids and grandchildren, we can help.
Battaglia, Ross, Dicus & McQuaid, P.A. is U.S. News and World Reports Tier 1 law firm in Florida, specializing in Estate Planning & Probate since 1958. With award-winning experienced estate planning attorneys, they can help you create a trust to avoid complications for your family after your death.