Secure Your Grandchildren

by | Mar 8, 2019 | Estate Planning

A family of three, including a mother holding a baby and a father, is sitting at a desk reviewing estate planning documents for their grandchildren with a professional woman who is holding a pen and has a laptop open in front of her. The baby is touching the papers, and everyone looks engaged.

Secure Your Grandchildren’s Future: Set up a Trust Fund

If you are thinking about the future of your grandchildren, you could choose to leave them money or pay for future costs such as college tuition. However, setting up a trust on their behalf is a better option and here’s why.

Benefits of a Trust Fund

One, when you establish a trust fund, you call the shots on how you’d want the funds to be utilized, that is, to buy a house, car or fund the education of your grandchildren. Two, it frees you to decide when the money should be released based on milestones instead of all at once. Three, the money is protected against dangers such as creditors or challenges with substance abuse. Finally, trust funds help your grandchild to make strides in life through achieving specific goals such as purchasing a house or setting up a business.

How to Establish a Trust

Before setting up a trust, you have to establish what you want to accomplish with it. This is because gift trusts are irrevocable which means that once you set them up, there is no turning back. To start the process, work with an attorney as a trust fund is a legal structure. Next, you have to appoint a trustee. A trustee will have the role of approving any distributions from the trust. There are two kinds of trustees:

An individual trustee- they are preferable if a close relationship is needed with the beneficiary or if they require specialized knowledge such as managing the family business.

Corporate trustee- they are chosen when a trusted individual cannot be found who will be responsible for managing trust assets or making crucial decisions on making distributions.

Types of trusts

There are two options when setting up a trust:

A family pot trust-

This is set for all of your grandchildren and is especially effective when you have a large family. It also offers discretion to the trustee when distributing assets. Since this is a single trust, the trustee decides when and the amount of money to give to each grandchild. A pot trust can also be set to safeguard the financial legacy of your family for the coming generations.

Individual trusts-

This is the better choice when you have one or a few grandchildren that you’d want to leave assets. Most grandparents opt to assign equal amounts of funds into every grandchild’s trust.
Before setting up a trust fund, have a family conversation with the parents. The parents may hold varied opinions on inherited wealth. Besides, they will be responsible for preparing the children for inheritance.