Do My Children Need a Trust Fund in North Palm Beach?

The term “trust fund” often appears in movies and television shows usually in reference to wealthy children with access to their parents’ fortune. If you have been financially successful in life, you might wonder whether you also need a trust fund for your children. How exactly does a trust fund work? Is it the right choice for your family? Is it solely reserved for the ultra-rich, or can lower-income families benefit from this strategy as well? These are questions you might want to ask an experienced estate planning attorney in North Palm Beach.

How Does a Trust Fund Work? 

A trust fund is a specific type of trust designed to provide support for beneficiaries over an extended period of time. Trusts are highly flexible estate planning tools, and they can help your children access your wealth in a sustainable, gradual manner.

The term “trust fund” generally refers to a spendthrift or “drip-feed” structure. With this method, beneficiaries (such as children) do not receive access to 100% of the trust assets at once. Instead, they may receive gradual “disbursements” or distributions from the trust over time.

These Trusts prevent beneficiaries from spending or wasting the assets over a short period of time. This is a common concern for many parents, especially those with high net worths or with children that cannot manage assets. These parents may be worried that their children will quickly drain the family fortune on frivolous purchases, such as sports cars, needless luxuries, or even illicit substances.

Do My Children Need a Trust Fund in Florida?

Sometimes, these concerns about financial irresponsibility may be based on the youth and experience of the beneficiaries. These beneficiaries may not struggle with issues like substance abuse or gambling addictions, but the parents may still be concerned about giving someone so young access to so much wealth.

In other situations, there are genuine fears about a financially irresponsible beneficiary wasting the family fortune. In this situation, a spendthrift trust can help parents avoid feeding dangerous behaviors.

Finally, some children have developmental disabilities that will prevent them from ever having the necessary skills to properly manage their finances.

Trust Funds Can Come With Strict Rules 

Parents are free to create various rules or “conditions” when creating trusts. A common example involves the requirement to graduate from college before gaining access to the trust assets. Alternatively, the trust fund may simply give children access to the assets once they reach the age of 18, or 25, or older. Parents can get creative with these requirements, staggering payments over several anniversaries and some trusts require beneficiaries to maintain gainful employment or complete substance abuse treatment before getting access to funds.

Can a North Palm Beach Estate Planning Attorney Help Me Establish a Trust Fund for My Children? 

A North Palm Beach estate planning attorney may be able to help you establish a trust fund for your children. However, the first step is to determine whether this strategy aligns with your family’s unique circumstances. While an online article can help you understand how trust funds work, a consultation with Kitroser Lewis & Mighdoll may be more suitable if you want to determine whether this strategy makes sense for you. Schedule a consultation today to learn more.

Source: 

investopedia.com/terms/t/trust-fund.asp