By Angela M. Ward, Attorney
The term “Trust” has traditionally been associated with very wealthy individuals. For example, “Trust fund babies” refers to people who have inherited large fortunes. But Trusts provide a range of practical benefits and can be used by parents in almost any income bracket.
Anyone with children under the age of 18 or who is responsible for people with special needs should explore the value of Trusts to determine if this legal tool can help them protect their dependent’s interest.
What are Trusts?
Trusts are legal documents that manage the distributions of funds, including proceeds from the sale of assets, such as a home or vehicles, and retirement savings, such as 401(k)s, pensions, or life insurance policies. They can also manage the distribution of personal property, such as art, furniture, or pets.
A Trust also provides ways to protect beneficiaries against the mismanagement of an inheritance. It can specify how funds can be used, distribute parts of a legacy as the heir reaches certain ages or milestones, and provide timed income or stipends for guardians. It can also be managed by a third-party trustee.
What is a Minor Trust?
This type of Trust is used to hold and distribute property or assets to minors under 18. It allows caregivers to ensure that the money or property assets are held in Trust or withheld until the minor reaches the age of majority.
By withholding assets until the beneficiary comes of age, the author of a Minor Trust protects those assets from being diminished by guardians, caregivers, or the child.
The Role of Trusts and Guardians
Guardians care for dependents. That care may require supplemental finances. Some Trusts prohibit guardians from accessing the funds in the Trust. Other Trusts allow trustees to evaluate requests for withdrawals. For example, the guardian may need to purchase a larger home to accommodate their new wards. Other Trusts specify regular payments to guardians to cover expenses.
The parent should spell out the terms of the Trust and specify what share can be used for the child’s care, which portion should be set aside, and which percentage should compensate a guardian for their duties. It’s also wise to set up a process to allow guardians or minors to request funds from the Trust in exceptional circumstances. The validity of these requests is usually decided by a trustee.
Varying End Dates for Trusts
Parents may choose a variety of end dates for Trusts. They may use a Trust to allocate funds for education. In addition, they may choose to distribute the Trust in increments to ensure the child does not spend the inheritance too quickly. Other parents want to set aside funds in ways that provide financial help at key ages, for example, at ages 18, 21, 25, and 30.
What is a Special Needs Trust?
Families with special needs dependents of any age must choose a guardian who is not only able to care for a child into adulthood but also lives close to any resources the dependent may require. Providing financial support without jeopardizing federal aid such as Supplemental Security Income and Medicaid benefits is also important.
A Special Needs Trust can hold bequests and assets without jeopardizing state aid. In this situation, a trustee spends the money on the dependent’s behalf for anything from personal care to entertainment or trips. Because the money goes to a Trust instead of an individual, the inheritance doesn’t affect other benefits.
An Estate Planning Attorney Can Help
Trusts can be a part of a sound Will and Estate Plan. When set up correctly, Trusts can protect the welfare of dependents and reduce the stress and expense for heirs.
Contact us today if you’d like to find out more about how the attorneys at The Law Offices of Going and Plank in downtown Lancaster can help you create, review, revise, or administer Wills, Trusts, and Estates.
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