Setting up a trust fund for your children is one of the best things you can do for them as a parent. However, nothing can ever be good if you do not do it rightly. Parents make various grave mistakes when creating a trust fund for their children.
Hiring a professional estate planning counsel can help you avoid such mistakes and make sure your child never faces any difficulties in the future. If you wish to handle things solo, here are some things you need to look out for.
Biggest mistakes parents make when creating a trust fund for their children
Selecting the wrong trustee.
Most people do not think choosing trustees is a very difficult job. They just pick anyone who has a good relationship with their children, such as their aunt or uncle. However, there are multiple things wrong with this. Not everyone who is good with your child should be given control over your child’s finances. A better option is to have the bank as a trustee.
Not being clear about the goals of the trust.
When you have no or wrong goals about your trust, you may give your children access to money that may do more harm than good. Planning thoroughly about how and when your children should get access to this money is integral to setting up a fund. This ensures the best use of the money and a secure financial future for your children. An attorney can help you understand the best options according to your needs.
Not reviewing the trust annually.
When you first start creating the trust fund, you may have picked a responsible and sound person as a trustee. However, after ten years, the person has changed, and you have watched them slip into depression or develop an alcohol problem.
Change is an inevitable part of life, and you cannot expect a person to remain the same throughout their life. Therefore, it is important to review your trust once every year to see if you should make any changes.
Not planning for college.
UGMA or UTMA accounts are common trust funds for children. They are pretty straightforward in nature. All you need to do is put money in them to make sure they are funded. However, you must not forget that this money can be considered assets owned by the minor when applying for college financial aid. This can keep them from getting grants, scholarships, and even loans.
Mistakes are common because the average person does not have expert knowledge about trust funds. Hiring an attorney can help secure your child’s future.