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The Biggest Mistake Parents Make When Setting Up A Trust Fund
Are you interested in creating a trust fund for your future generation? Do you want to ensure your assets go to a specific person once they graduate?
Even if your answer is not yes, you might want to know how to set up a trust fund. There seems to be a common misconception that only rich people (like the ones who own castles or yachts) can create or have a trust fund. You do not have to be a trust fund baby to create a trust fund. Anyone can, and we will tell you how.
In this article, we will discuss how to start a trust fund, who can be a trust beneficiary and the biggest mistake parents make when setting up a trust fund.
So let’s start without much delay.
What Is A Trust Fund?
A trust fund is a legal person that contains properties and assets on behalf of another legal person or organization. The person who manages the operations of a trust fund is called a trustee. The trust document will name the person who created the trust as well as the trustee.
A trust fund contains information on bank accounts, properties, businesses, heirlooms, money investments, and other financial information. It might even include stocks and shares or cryptocurrency if it is legal in the country.
Trustee, Grantor, And Beneficiaries
Basically, the person creating the trust called the grantor, can leave all they want to their beneficiaries in the trust. Trust comes with certain catches. The grantor sets your circumstances and conditions. As long as the beneficiaries meet these circumstances, they will be entitled to the property mentioned in the trust.
The grantor of a trust as well as the state laws, decide these requirements. The requirements can talk of a specific age or place that the beneficiaries have to be. For example, the parents may choose their children as beneficiaries as long as they graduate college by the time they are 22 years old.
Why You Should Set Up A Trust Fund?
Trust Funds are a sure-shot way for a grantor to manage their assets. They are even able to take care of the assets until the beneficiaries attain the majority, whether or not they are around at that time. Unlike wills, a trust fund will allow you to avoid the probate process. They allow for the grantor to allot specific assets for certain purposes.
How To Create A Trust Fund?
In this section, we will tell you in a brief and easy manner how to set up a trust fund.
Trust funds sound expensive, right? The last thing you want is to mess it up. So, it is better to learn about the biggest mistake parents make when setting up a trust fund first. For that, let us get the basics out of the way.
A trust fund will help you reduce estate taxes and also direct your assets towards special needs. Therefore, to enjoy these benefits, let us find out the process of setting up the trust fund.
You need to know the purpose for which you want to create the fund. One of the biggest mistakes parents make while setting up a trust fund is not knowing the purpose. You have to know who the beneficiaries will be and what your assets will contribute to. It can be a security fund, a college fund, or any other special need.
You need to know the state where the source of the fund will come from. Your trust fund may be a part of your investment, real estate properties, or even savings. The source will also depend on the purpose of your fund.
As the grantor, you will have to decide who the trustable me. You need to choose someone trustworthy who can take responsibility for managing the whole operation. If you are a parent making your children your beneficiaries, please choose someone with whom you can trust your children.
After that, you will have to see a trust and estate lawyer to legally create your trust fund. You can go ahead in your search for an estate planning attorney (aka trusts and estates lawyer) near your area. If in doubt, you can even visit our website to get in touch with a good lawyer.
And You Have Yourself A Trust Fund
Once the trust is set up, you can fund it. From the moment you create a trust, the ownership and deeds will be transferred to the new trust owner. Now once the trust fund is complete, the Trustee you name will take care of the process.
What Is the biggest mistake parents make when setting up a trust fund?
While a lot of effort and the best intentions go into planning a trust fund, parents often fall short. The biggest mistakes that parents make when setting up a trust fund are some of the basic ones. Now let us check them out so that we don’t repeat them.
Check Your Trustee
The first biggest mistake parents make when setting up a trust fund is not choosing the right trustee.
You may have a picture in mind as to who can be the perfect trustee. However, we would like to give you a heads-up before you make them your permanent trustee.
- Check if they are in the right health.
- Choose a Trustee that lives either close to you or at least in the locality.
- The Trustee should be able to take care of your children.
- Age is definitely a determining factor.
- Please choose a Trustee who is more likely to be in good health when your children come of age.
The second biggest mistake parents make when setting up a trust fund is not setting up provisions for protection.
Provisions To Protect The Trust And Your Kids
When you put your assets or money into a trust, make sure that you are choosing a responsible trustee. Also, have provisions through which your children can enjoy protection if the Trustee goes astray. See to it that you are beneficiaries and cannot use illegal means to misuse the trust fund.
A little bit of extra goes a long way. Apart from what we talked about, you could do a little more. Make provisions so that you can keep reviewing your trust every now and then to add more relevant conditions to it. So, bear these in mind to avoid the biggest mistake parents make when setting up a trust fund.
Debkanya is a lawyer turned writer. With an experience of 3 years, she is your go-to source for all things law. She has a soft corner for the US and international section. When the weekend arrives, you'll find her reading up on politics, Austen, or travel blogs over a cup of coffee.View Post
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