Establishing a trust fund for a minor is a good idea if you want to make a financial gift to someone underage and want to retain control over the money or assets you have provided. If you fail to set up a trust fund or make other appropriate plans, the money you intend to leave for your child could end up under the control of a stranger appointed by the court. Your child could also end up inheriting a lot of money with no strings attached when he or she turns 18.
Parman & Easterday understands that parents, grandparents, and other relatives want to make provisions for children. If you fall in that category, we can help you determine whether setting up a trust fund is the right approach to take and if it is, can provide you with assistance in setting up your fund. Give us a call today at (405) 703-9987 to find out more about providing financially for the children in your life.
Setting Up a Trust Fund for a Minor is Important for Parents
For parents, establishing a trust fund to make sure their children are cared for financially, even if something happens to the parents, is of paramount importance.
There are substantial expenses associated with raising children. According to the Huffington Post, the cost to raise a child to adulthood is estimated at $245,340. This cost was currentfor a middle income family in 2013, so it is likely higher today. Many parents want to make sure they pay for these expenditures, including the cost of college, if they cannot be there to take care of their children themselves.
If parents leave money to their minor children in a will, it is difficult to determine who should manage the money or decide what happens to it. The same problem arises if parents pass away without a will and their children inherit under the laws of intestacy. A child under 18 cannot (and should not) manage money on his own, so he or she cannot legally take control over this inheritance. If parents haven’t made provisions for how the money is to be managed, the court will appoint a conservator and/or guardian, who may be someone the parents wouldn’t have selected. It could be a stranger, and could be someone other than the person who is raising the children.
The conservator won’t have specific instructions from the parents to fall back on as to how the money is to be used, so may well make different decisions than those the parents would have made. While the conservator is required to use the money to benefit the child and must make regular accounting to the court, the money may still be used in very different ways from what the parents would have preferred.
If plans are not made in advance and a conservator ends up in charge, the child usually receives the remaining money from the inheritance at age 18. This means a young and potentially irresponsible child inherits a huge amount of money with no restrictions or controls on how it is spent.
None of this is desirable. Parents can avoid this situation by setting up a trust fund for a minor. Any parent who wants to decide who manages the money left for their child and who wants some say in what is done with that money should set up a trust fund.
A Trust Fund Allows Control
Parents may set up a trust fund to make sure the right person manages money, but they are not the only ones who might want some control over what happens to an inheritance. Grandparents or anyone else making a financial gift may benefit from setting up a trust fund for a minor because they can name the person who will manage the money for the child and set conditions on how it is spent.
When a trust fund is created, the trust creator (settlor) can impose limits on how much money is taken out at a time, or can impose conditions such as the money must be used to pay for school or can only be inherited when the child marries or reaches a certain age. Only trusts allow for this type of control, which is why setting up a trust fund for a minor is something everyone leaving money to a child should consider- even if you aren’t wealthy.
Getting Help Setting up a Trust Fund for a Minor
Parman & Easterday can provide you assist you with setting up a trust fund for a minor. Give us a call today at (405) 703-9987 or contact us online to find out more about whether a trust fund is right for you or to get assistance with creating such a trust.
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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