If you are located in Ohio and need professional legal guidance, set up a time to speak with one of our attorneys. Please fill out the form below, and we will be in touch shortly.
A trust is a helpful financial tool to allow you to protect your income and wealth to pass it on to your children safely. Yet if your children are young, you may not want to have your assets go straight to them if you pass away early. A trust allows you to keep those assets safe until your children are ready for them. You do not have to be extremely wealthy to benefit from a trust, either. A trust can help any parent trying to leave an inheritance for their beneficiaries. If you consider the best way to protect your children in the future, you need to know about setting up a trust now while they are young.
A trust is a legal relationship that helps protect assets. It has three entities: the grantor, the person who establishes the trust and funds it; the beneficiary, which is the person who will receive the money in the trust at some point; and the trustee, who manages the trust its assets.
Trusts have quite a bit of flexibility in how the distributions are made. When a grantor sets up a trust, it must follow the legal requirements for trusts. Outside of those requirements, the grantor can make quite a few decisions.
Sometimes they will decide when the beneficiaries receive the distributions, such as requiring them to et a certain amount after completing college or getting married. Other times, the grantor may distribute the assets in specific percentages to different beneficiaries. The trustee then must follow those requirements. Grantors can also leave the distribution to the trustee’s judgment if they trust their chosen trustee.
There are several reasons to set up a trust. First, most people do so to minimize the tax burden assigned to distributions from an estate. Also, many will set up a trust so that the estate can skip the probate court and beneficiaries can get the funds more quickly. Finally, parents may use a trust to protect assets from young children until those children reach a certain age.
Several types of trusts are available, and choosing the right one is essential to protect your assets and your children the way you want. Some that work very well for children include:
In most trusts, the money stays in the trust until the child turns 18 or older. However, there are circumstances when you can take the money out early. Specifically, if your child has a terminal illness and needs that money for medical or funeral costs, then you can request it before using the Early Access Medical Report.
While a trust can be an important vehicle for protecting your child’s inheritance, it is not perfect. There are some drawbacks you need to weigh.
First, trusts are not free. Whereas having your estate managed by only a will incurs costs after you due for your beneficiaries through the probate court, when you have a trust, you have costs upfront for legal counsel and filing fees, among other things. These costs are less than those of probate for most people, but you will need to have the money.
Second, trusts require careful record-keeping, particularly if you have to move property around. Failure to keep good records could lead to missed assets, not under the trust’s protection.
Finally, trusts are not protected from creditors. If you pass away with a lot of debt, your creditors can come after the assets in the trust.
Trusts can help parents protect assets for young children, but they can feel complicated to set up. If you are considering a trust for your own estate planning needs, reach out to the legal team at Heban, Murphree & Lewandowski to learn more about your options.