Should You Set Up a Trust for Your Child?

There is a common misconception that trust funds are a preserve for the extremely rich to enable children from wealthy families to inherit from their parents. That couldn’t be further from the truth. There are many advantages to setting up a trust fund as a way to transfer wealth to your children. Trusts are also helpful to protect the funds set aside for a child who is an addict or incapacitated. There are many different kinds of trusts.

Lawyers from a family law and estate planning law firm in San Antonio explain several elements that make a trust fund beneficial, regardless of your wealth. With the guidance of legal experts, you can achieve smart estate planning by using available tools and vehicles to protect your legacy and provide for your children after you are gone.

What Are the Benefits of Setting Up a Trust Fund for My Children?

Setting up a trust for your children can provide some critical benefits, such as:

  • Enabling you to protect your loved ones with special needs
  • Providing support for your children until they reach a certain age
  • Sometimes keeping your estate out of probate
  • Potentially reducing gift and estate taxes in the future
  • Protecting your loved ones from creditors and potential lawsuits around the estate
  • Controlling what happens to certain assets such as the homestead

Skilled trust lawyers in San Antonio can also help you evaluate how setting up a trust can help you meet other estate planning objectives. Since setting up a trust can be more complicated than other estate planning tools, lawyers can help you create one while avoiding mistakes that could create challenges later.

How Can I Set Up a Trust for My Children?

An appropriately crafted estate plan can give you control over the distribution of your wealth when you’re gone, depending on whom you designate as the beneficiary. San Antonio trust attorneys recommend setting up a trust for minors to safeguard their inheritance. You can outline how much money the children will receive, at what age, and how much they can spend. You can put conditions on whether they receive any money at all. You may fund the trust now or wait until after you die depending upon the type of trust you choose.

A team of attorneys can guide you through the steps to set up a trust for your children:

Choose the Most Suitable Type of Trust to Set Up

Determining the appropriate type of trust for your child depends on your specific goals, the needs of your child, and the circumstances. One advantage of having a trust is that it can be tailored to fit various situations. Common types of trusts you can use for your child are:

  • Revocable living trust: It allows you to manage the assets in the trust while you’re still alive. Depending on the terms of the trust, you may use what you need for your own benefit and provide for your child’s needs over time, including provisions for when and how your child will receive the assets.
  • Irrevocable trust: The trust is not easily modified or revoked and is ideal for tax planning and asset protection from creditors to help you preserve assets for your child’s future.
  • Special Needs trust: These are also called Supplemental Needs trusts. You can ensure the needs of your child are met in a way that doesn’t disqualify them from receiving government benefits like Social Security Supplemental Security Income (SSI) and Medicaid.
  • Testamentary trust: You can establish a testamentary trust as part of your Will, which takes effect after your death. It allows you to maintain control over your assets in your lifetime and provide for your children after your demise. These are easily amended or revoked during your lifetime by making a new will. Instead of giving your children their inheritance all at once when they are young, the trust can be used to manage how and when your children will receive funds from their inheritance after you are gone.
  • Education trust: Education trust is specifically designed for educational expenses and is an excellent way to ensure you provide funds for your child’s education, covering costs like tuition, books, and living expenses.

Choose a Trustee

After choosing the type of trust to set up, the next crucial step is to select a trustee to oversee the assets in the trust and ensure the trust terms are followed for your child’s benefit. Trust lawyers in San Antonio advise you to assign anyone you trust as your fund’s trustee, whether a family member, professional trustee, or close friend. For large estates, a financial institution may be chosen as trustee, but often a friend or family member can do the job less expensively.

The important thing is that the trustee must be extremely trustworthy and cannot have declared personal bankruptcy protection or been convicted of a crime of fraud. Remember that there is little to no oversight to insure the trustee is doing what the trust requires, other than oversight by the beneficiaries themselves. An alternate trustee should be named in case that trustee can no longer serve.

Factors to consider when appointing a trustee include:

  • Trustworthiness
  • Financial acumen
  • Willingness to take on the responsibility
  • Ability to communicate with the beneficiaries

Choosing someone with a good relationship with your children and who understands your family values and goals is beneficial. Professional trustees provide the benefit of bringing expertise in financial management, administrative duties, and legal compliance in managing the trust.

Funding the Trust

Once you establish your preferred trust and choose a trustee, the next step is to fund it. In Texas, you can invest in a trust with real estate, cash, bonds, and personal property, depending on your financial situation and goals. Trusts may also be funded with life insurance proceeds.

For example, you can fund the trust with real estate or other high-value assets if the goal is to provide long-term financial security. Cash or investments that can grow over time can be a better choice if the fund’s primary purpose is to provide for your child’s education. If you have only a modest estate but have substantial life insurance, then you may want the life insurance proceeds to be managed and protected from waste by your children. Or life insurance proceeds may be earmarked for a certain purpose through a trust.

Legal Requirements and Documentation

Texas estate planning laws require adhering to specific legal requirements and documentation. San Antonio trust lawyers specialized in the area can create the necessary documents outlining the terms of the trust, how the assets should be managed, and distribution to the beneficiaries.

Your lawyers will also ensure the trust is formed within the legal confines of estate planning. For example, they can prepare a deed transferring the property to the trust if it includes real estate. They can also take you through every other requirement to make the trust enforceable. A trust document is not effective if the assets are never transferred into the trust ownership. Trusts sometimes fail because the trust was not funded properly.

An Experienced Family Law Attorney Helping You Establish a Trust for Your Child

Setting up a trust can be complex, given the many legal requirements that make it enforceable. Creating one without the involvement of skilled trust lawyers in San Antonio can be risky because even the smallest error can cause significant problems. They can help you understand estate planning laws, draft trust documents, and navigate complex matters.

Laura D. Heard Law Firm Inc. is a San Antonio family law and estate planning law firm with dedicated trust attorneys who can help you with your estate plan. Let us help you explore the available options to help you create a trust that best serves your child’s interests. Call us at 210-775-0353 to schedule a case strategy.