As a parent, you’re committed to ensuring that your child always has the resources they need in life. However, while you might do all that you can to provide for them, you might not always be around to do so. This is something no parent wants to think about, but it is a reality for many families. Fortunately, you can plan far in advance to ensure that your child will receive assets from your estate that will benefit them in the future. You never know what the future may hold, and a trust allows you to feel confident knowing that your child will have access to funds later on in life. When you create a trust for your child who’s under the age of 18, these trusts are known as minor’s trusts.
At Tressler & Associates, we know how important it is to be able to provide a comfortable life for your children. Setting up a minor’s trust is a great way of doing this, and we can help ensure that it’s done correctly.
A minor’s trust operates very similarly to other types of trusts. However, as these are specifically for minors, the assets placed into the trust are held until the child reaches a certain age. In many cases, parents choose to allow their children to access the trust when they turn 18 or 21. The beneficiary must be at least 18 before they can access their trust, as that is the age of majority in Tennessee.
Parents may also choose to include additional stipulations to the trust, a common one requiring that the child has graduated from college before they can receive their inheritance. A trustee will be responsible for the trust until the child meets the qualifications to access their trust. While trusts often contain money, you may also place other assets in a trust, such as property.
Of course, the main advantage to creating a minor’s trust is that you can distribute assets to your child. However, there are other important reasons to establish one that you should consider.
One of the main reasons families choose to set up trusts for minors is because of the tax benefits it can provide. There is a federal gift tax on gifts made, which is $16,000 per recipient in 2022. However, trusts need to qualify for this exemption, and typically, most trusts do not meet the qualifications for gift tax exemption. Under Internal Revenue Code Section 2503(c), a minor’s trust can qualify for this exemption.
If you’re leaving significant assets to a child, you may be worried about how this will be handled. A minor’s trust allows you to set aside funds now, knowing they won’t be touched until later on. You can ensure that your child will have financial resources available, but not until they’re mature enough to be able to handle it. A minor’s trust also allows you to decide how the child will receive the assets. Some trusts may allow the beneficiary to access a certain amount yearly or at certain ages. Some might also allow the assets to only be used for certain purposes, such as their education.
If you want to ensure your child is provided for, now is a great time to learn more about how a minor’s trust can help. Understanding and creating a minor’s trust can be complicated, which is why an estate planning attorney can help. At Tressler & Associates, we know how beneficial a minor’s trust can be and can help you set one up properly for your child.
If you have a child under the age of 18 and want to know that they’ll be provided for when they’re older, contact us today to learn more about trusts for minors.
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