Often viewed as spoiled rich kids or adults drained of all ambition by an unnatural financial infusion, American society has a negative association with young people who inherit trust funds. While that stereotype may be unfair and overly broad, there are pitfalls that parent should avoid when creating trusts for young people, as no one wants to stifle a young person’s ambition.
As an estate planning professional, I have helped countless people create comprehensive estate plans, including trust funds for a loved one. A well-crafted estate plan can help you provide for yourself in old age and protect your assets for loved ones. Call experienced Bay Area attorney Linda J. MacKay today at 408-379-9600.
Common Trust Fund Mistakes
Not Setting Parameters on Your Trust—your child or beneficiary can receive trust funds directly when they turn 18. But it is rarely a good idea to turn a large sum of money over to a young person. Instead, consider delaying the trust’s payout till later. I usually suggest that clients create flexible goals for beneficiaries during trust formation. For example, a beneficiary will only receive trust funds after completing college, attaining a technical certificate, finishing military service, turning 30, or some other achievement that signifies that he or she is sufficiently mature to handle a large sum of money without it stifling his or her ambition.
Appointing the Wrong Trustee—for the trustee to do his or her job, he or she must be alive after you die and be someone available to your beneficiaries if they have questions or concerns about the trust’s administration. That suggests a younger person, and perhaps someone with a close relationship to your family. However, he or she must also be tough. If you set firm achievement guidelines in a trust, you want the trustee to be sufficiently strong-willed to say no to your beneficiaries who seek a payout before meeting your requirements. Unless you choose a trustee that has the backbone to enforce your requirements, they are meaningless. I usually advise clients to hire a trust company to administer their trusts, as they will surely outlive you and will strictly adhere to your requirements.
Failing to Review Your Trust Periodically—once you create a trust, you should review it every few years to make sure it still makes sense. If your beneficiaries are all college graduates with strong careers, it may make sense to remove the requirements you have placed in the trust to make sure that they achieve certain goals. Similarly, as new children are born and enter your family, you want to make sure that they are included in the trust as well as a beneficiary. If you fail to do so, they will be excluded once you die.
If You Need Estate Planning Help, Call Linda J. MacKay Today
Creating a trust fund for your child does not have to doom them to a life of underperformance and sloth. While there are negative connotations that go along with trust funds, with the help of an estate planning professional, you can use a trust fund to motivate your child to achieve worthwhile goals. A trust fund is often an essential element of a comprehensive estate plan aimed at protecting your assets for you and your family’s future. If you have questions about the estate planning process, call an experienced estate planning attorney today.