Another suggestion is to bring the child on a as co trustee at age 25 so he gets used to managing the trust money. In order to begin the process of creating your trust documents you will need to give your lawyer access to all accounts and deeds that are to be placed in the trust.
That said don t overlook the option of establishing a trust.
How to put money in trust for a child. In many cases trusts may provide you more alternatives for how and when your grandchildren receive funds says paul sowell senior wealth planner for wells fargo private bank. 5 common mistakes when creating a trust fund for your child. Planning for a child s death.
Distribution ages may start as early as age 21 but age 25 or 30 is far. The account is set up in trust because the child is under the age of majority and cannot enter into a legal binding contract. Therefore the principal distributes to that beneficiary as he or she attains certain ages.
This will avoid estate taxes being paid by the estate of the beneficiary as well as the estates of the beneficiary s descendants. If you re considering transferring wealth to your grandchildren you could gift money outright or pay tuition or medical expenses directly on their behalf. The younger the children are the more flexibility you have in funding the trust.
Although the trust is irrevocable the money is not the property of the person receiving it. Remember that the purpose of the trust is to remove the property from your possession and place it into the possession of a legally designated entity. You want to not only maximize the nest egg called the corpus of the trust but also reap as many tax and estate benefits as you can.
For example if a grandparent gives money to their child with instructions to invest it on behalf of the grandchildren a trust has been created for the benefit of the grandchildren even though no. The adult is then responsible for investing for the child and signing the contract on behalf of the child. Consider setting up the trust as a dynasty trust if the beneficiary already has a sizable estate or if you want to create a lasting family legacy.
Sometimes money is held in trust for a beneficiary whom the grantor may not feel is mature enough to handle large sums at the time the trust is created. An in trust account is an informal trust so that an adult can invest funds on behalf of a minor. Because of this a child applying for financial aid would not have to claim these funds as assets.
Great at managing money and put in place limits to what they can withdraw the money for particularly when they are under. List out the child or children who will be the beneficiaries of the trust by age and list your goals for them.