What are the advantages of placing assets in a trust for my minor child?
Many younger parents put off estate planning, believing they have plenty of time to set aside assets for their children before their death. However, failing to create an estate plan that benefits your children now could leave your child without a named guardian and no control over how the child’s assets will be managed in the event of your untimely death. With a trust for minors, you can designate that certain funds be provided to your child to cover costs of support and education. The trust will further protect assets from creditors. Our California estate planning lawyers explore the many benefits of trusts for minors below.
Creating a Trust for a Minor
Trusts for minors are created so that parents or other relatives can set aside property for a young person, but still ensure the property is cared for by a designated adult until the child is able to responsibly manage the funds him or herself. Trusts for minors can be created either through a living trust or in your will. In the trust document, you will leave property to your minor child, but also state that if the child is a minor at the time of your death, the named trustee shall care for the property until the child reaches the age of majority.
If you pass away while your child is still a minor, you can rest assured that the assets you have left to your child will be carefully managed by the trustee that you chose. When your child is older, which could be 18 or potentially in their 30s depending on what clause you put in the trust, he or she will receive ownership of the assets along with any interest or income earned. The trust could further be created so as to cover the needs of the child before he or she attains the age of majority.
One option when creating a trust for minors is to use a 2053(c) trust. This minor’s trust is designed to avoid gift tax while providing for your minor child. Under the trust, the parent can make tax free gifts in the amount of $14,000 annually to be held in trust for the child. The trust’s assets will be transferred to the minor when he or she turns 21. Contact an estate planning lawyer for more assistance with setting aside assets for your minor child using a trust.