What is a Children’s Trust?
A Children’s Trusts is a type of irrevocable trust designed to provide for minors. In other words, the assets are given away and held in Trust by a third party, until the minor attains the age stated in the trust. Since the trust is irrevocable, the beneficiaries cannot change, nor the assets be removed. A grandparent or parent may start the trust, and must hand over management of the Trust to a third party Trustee.
Why start a Children’s Trust?
The assets entered into a Children’s Trust are permanently part of that trust, and held separately from the Estate of the individual starting the trust. These trusts are often established to protect an inheritance, and provide some protection of assets from creditors or divorce. A Children’s Trust may cover a single child, or there may be a single trust for all children together. The trust may designate how funds or assets are distributed and at what time. Typically, when a child reaches the age of majority or the person who settled the trust dies, the child or children begin receiving distributions. Other previsions, such as a spendthrift provision, may be made. If parents survive and the children grow out of the trust, the assets in trust may be reassigned according to a will.
Children’s trusts may include benefit pay-outs, legal suit decisions and settlements, or donations made to the family in the event of a tragedy. A well-designed trust will account for variables in life circumstances. Guardians are typically unprepared for the management of the minor’s estate, and Children’s Trusts give guidance to a Trustee on how to best manage asset’s on the minor’s behalf, and can ease the burden of the guardian.
When should I start a Children’s Trust?
As with most trusts, start your Children’s Trust as soon as possible. Human nature doesn’t plan for death, particularly young parents with young children. The legal process after a death of a young parent can be confusing and costly, leaving fewer resources for the child. Life Insurance benefits may be placed into Trust, along with any other protections or benefits. Communities will often reach out to help a family in a time of need, and those donations may also be placed in trust.
Trust law can be complex, emotional, and stressful. Eileen Kerlin Walsh P.C. and Associates are here to help with questions on childen’s trust and other family estate planning. Please call 708-448-5169 to schedule a consultation.