When people have children, they usually set up an estate plan so their children will receive care if one of the parents dies unexpectedly. There are many ways parents can provide for their children after their deaths. Some parents may choose to set up a trust. If people choose this option, it is a good idea for them to take a few things into consideration.
A trust allows people to provide for their children by keeping their money and property safe. According to NerdWallet, some people may wonder why they need a trust if they have life insurance. Many parents might want to simply name their children as their beneficiaries. However, it is important to remember that a life insurance company may not automatically hand this money to minors. Children may need to have a guardian before they receive their parents’ insurance. Setting up a trust can ensure that the children’s guardian can immediately access the assets to care for the children. Additionally, parents can leave instructions so a trustee knows exactly how to manage this money for the kids.
When parents set up a trust for their children, it is important for them to think about the future. Forbes says that it may be a good idea to set up separate shares for each child. This can help ensure that each child gets the same amount of money. Additionally, some children may not be ready to manage their portion of the trust once they turn 18 or 21. It may be a good idea to give out the assets in stages so that the kids receive a certain amount of money once they turn 25 and then more once they turn 30. This can help the kids learn how to manage their money while protecting the rest of their assets.
Parents may also want to make sure their children can alter the terms of the trust as they get older. Children will grow up and may have their own families, and they may want their family to have access to the trust assets in the event of an untimely death. Conversely, people may want to make sure the trust is a lifetime trust. This would make sure that a child retains all of his or her assets if he or she divorced in the future.