Trusts for Children, Part 1 – How Does a Trust Work?

A pen on a handwritten piece of paper

The First Step

Congratulations on taking the big step to ensure that the young ones in your life are cared for into the future considering creating a trust for children.  We are sure that this will give you peace of mind and security.  There are always a lot of questions about how a trust works in practice.  We hope this overview will give you information on what a trust can do for you.  Are you ready to get your trust for children written?  Contact us today to schedule a consultation with an attorney for confidence in your future.

The questions and answers below assume that the parents or grandparents are gone, and the trustee is managing and distributing money for the benefit of the child(ren).

Your Trustee is a Fiduciary

Your Trustee is in charge of the funds for the benefit of the children.  They are a fiduciary—someone who has to care for other’s money under laws and regulations.

Your Money Will Continue to Grow

Your Trustee will invest the funds so that they continue to grow.  They will also distribute money for the benefit of the children under the HEMS standard (health, education, maintenance, and support) to avoid unnecessary taxes.

Distributing Money for Your Children

If your children are still minors when the Trustee is acting, then the Trustee will ensure that the guardian has the money and support that they need to care for the children.

If your children are in college or older, then the Trustee is likely to be far more directive on how the money is used.  For example, they may deny requests for expenses that they think are not in the interest of the child (e.g.: take a year to be a bum on the beach).  They may also put limits on how much they provide (e.g.: the trust will pay for ¾ of your college expenses, but you have to work for the other ¼).  The Trustee can also provide funds for good choices that they think you would approve of (e.g.: down payment on a home or to start a business).

There is far more to learn about trusts for children.  See the following continued series for more information:

Part 2: Distributing Trust Money

Part 3: Whom Should I Choose as Trustee?

Part 4: Leaving Instructions for the Trustee

Part 5: How Long to Leave the Funds in Trust

Part 6: What if a Child is Disabled or Addicted?

Part 7: What if I Want to Change My Trust?

Want to learn more?  Check out these other resources.

Child hands in adult hands

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