Parents know that they need to provide for their kids. However, some parents also look to the future and want to ensure their financial stability and security even after passing. This is one of the many reasons why parents set up trusts.
Foto di Charles McArthur da Pixabay
Those who wish to set up trusts for their heirs must work closely with a professional well-versed in financial planning. A financial advisor will help you determine the amount of money you have to save to grow the trust, analyse the risks, and advise you on your current position and strategies. Their expertise will ensure that the trust fund will be viable enough for your children to enjoy afterwards.
If you’re considering putting up a trust fund for your children, here are some things you must look into.
Understand what a trust fund is
A trust fund is a legal receptacle a grantor creates to put money or assets into for a third-party beneficiary. The grantor appoints a trustee to oversee that the assets will be distributed based on the terms. Trusts help wealthy people avoid probate court and keep family matters private. Your beneficiaries can receive the trust upon reaching a certain age (depending on your wishes) and must still follow the fund’s provisions.
Set your goals
If you wish to set up a trust fund, you must be clear about your intentions. For example, you may want to bequeath certain assets to your children, or you may want the fund to be used for college tuition and other expenditures. Regardless of how you build the trust fund, you must ensure that the objectives are as straightforward as they can get.
Select what kind of trust you want to establish
Trusts can be classified into two categories: revocable and irrevocable trusts. Revocable living trusts (RLTs) are the most common ones, allowing you to make changes as necessary at any time. You can add or remove beneficiaries and provisions and cancel the trust altogether.
Meanwhile, an irrevocable trust is more strict about the regulations. One cannot make additional changes immediately, and everything must go through a process.
Determine the trust terms
Among the things you have to do is to determine the terms of the trust. You’ll need to choose a trustee who will oversee the asset distribution and can also manage the assets to ensure maximum profitability. The grantor can be the trustee but must also appoint a successor trustee in the event they can no longer function.
You’ll also determine the asset distribution scheme, especially if you have several beneficiaries. You must outline in the trust how the assets will be divided once the trust is made available to the beneficiaries.
Create and fund your trust
The last step is to create the trust by notarising the documents and begin to fund the instrument accordingly. You may transfer various assets to the trust, and although it will be fraught with paperwork, it’ll be a necessary step.
Conclusion
Setting up a trust to provide for the future is a great thing to do. You’ll ensure your children will have a comfortable life even after you’ve passed and protect your assets, too.
