Setting Up A Trust For Your Child? Avoid These Common Mistakes In The Process
When you bring a child into this world, you fully expect that you'll be around for the duration of their childhood and well into their adult years. However, life can take unexpected turns, and when or if this does happen, it is crucial that you know your child will be taken care of once you're gone. It's for this reason many parents set up a trust fund for their children. A trust fund is a savings fund that's set aside specifically for the child. But if this is not properly carried out, there can be some snags that affect the wellbeing of your offspring when you're no longer around to say anything. Make sure you avoid these mistakes when setting up your child's trust fund.
Mistake: Not making sure the trust manager is someone reliable.
Why? Many parents who set up a trust for their child will make the person in charge of that trust a close family member or even the godparent of the child. However, it is also a good idea to have the trust assigned to a professional trust management firm as well. This gives a secondary level of security to ensure trust funds are handled in an appropriate manner. Plus, if anything happens to the original overseer of the trust fund, there will be someone trustworthy to step in and make sure your wishes are carried out.
Mistake: Not considering how you want the trust fund to be distributed.
Why? Trust fund distribution can happen however you deem to be the best way. For example, if you want the trust automatically distributed to your child on their 18th birthday, that is possible. This is actually one of the most common decisions. Yet, there can be more logical ways to distribute the funds, especially if the fund is a substantial amount, such as having a certain percentage distributed when your child turns 18, 21, and 24.
Mistake: Not designating secondary beneficiaries of the trust fund.
Why? You never want to imagine that something will happen to your child, but don't let the uncomfortable idea prevent you from adding secondary beneficiaries to the trust fund when you set it up. If something happens to your child before the trust can be distributed to them as you planned, the money can be held in limbo because no one will be sure of who you would prefer the fund be given to.