You want to ensure your child grows up happy and healthy – that may be why you started putting money away for their future. One of the first things parents should consider when protecting the future of their child is setting up a trust fund.
A trust fund is an allocated sum of money put away for the future use of a designated beneficiary. The trust fund then protects your assets until the beneficiary meets whatever conditions you set down so that they can access the money. (For example, you could set the trust fund up so that it will allow your child to access their inheritance when they reach a mature age.)
But is a trust fund really safe? Does it really protect your child’s future financial well-being? Here’s what you should know:
No one can legally take funds from a trust but the beneficiary
The one thing to remember about irrevocable trust funds, which are the kind most commonly used in this situation, is that no one has access to a trust fund except for the beneficiary and the trustee.
Commonly, you will be the trustee once you create a trust fund. Once you pass away, a successor trustee takes over your role. A successor trustee acts in much the same manner you would as a trustee – they manage the trust records, transactions and taxes.
When parents designate a guardian over their child – in the event of their premature death – some parents consider allowing the guardian to take assets for the care and well-being of their child. Even then, however, the trustee will act as the gatekeeper and make sure things are handled properly.
Neither a trustee nor a guardian is allowed to take funds from the trust for their personal use. Nor is another family member allowed to take assets from the trust on behalf of your child. Plus, the funds are protected from creditors – which could be important if you leave behind any unpaid bills.
You may need to seek legal support to ensure you set up your child’s trust fund correctly – one minor mistake could prove difficult for your child’s future. If you happen to be in an accident or experience a medical condition that prevents you from seeing your child grow, you should at least feel safe knowing your child will have their needs met.