One of the most common reasons to seek out trust options is for the purposes of passing assets on to children. The trust is put into place to provide for the future of the children while enacting provisions that limit the options they have for the money. This reduces the chance of an unwanted outcome that the gift of a lump sum of money can trigger, such as the children spending all of the money quickly. An irrevocable trust for children truly protects their financial future.
If the trust is irrevocable, the trust is put into place while you are alive but the grantor cannot alter the terms of the trust or take beneficiary names off of the trust documents. A revocable trust, however, can be amended as long as the grantor is still alive. One issue to remember with a revocable trust is that it will avoid probate but is not guaranteed to avoid federal taxes.
Trusts for children can be helpful when transferring assets while trying to avoid substantial estate taxes on the death of the grantor. An additional benefit of a children’s trust is that the terms conditional to the trust are created by the grantor and allows for customization of when the funds are transferred. For this reason, children’s trusts are good for meeting the unique needs of many families.
The trustee is responsible for managing the directives of the trust, but one way to make the process easier is to have the parents serve as the trustees. This simplifies the process since the parents are also the ones making the decision about how the money should be spent.
Placing funds into a trust for children is an effective way to transfer assets to children while still maintaining some control over the process. Because the trust can be customized, it is important to work with an attorney who understands the different tax consequences and governing rules of children’s trusts. Attorney Jonathan Meek will be happy to guide you through the process. Contact him today.
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