If you are thinking about setting up a trust for minor children, chances are you have lots of questions. Is it a good idea? What are the advantages? How does it work? What are the down sides? Do I need a lawyer? If you are asking these questions you are not alone. Setting up a trust can be daunting. Here are some steps you should take to get you headed in the right direction.

What should I do?

1. What are the advantages? First you should find out if a trust is right for you and your children.  Take a look at our article on the benefits of a trust.  If you don’t find that these benefits will apply to you, then your decision is easy – forget about setting up a trust.  However, if you’re still interested in a trust…
2. What are the costs? Setting up a trust can be very complicated.  There are number of types of trusts to choose from, and their implementation can vary from state to state, so, you would be wise to enlist the services of a lawyer.  Some law firms charge by the hour, while other charge a flat rate for setting up a trust.  Either way you’ll save yourself some money if you know your options and know what you’re interested in before you meet with your lawyer.

 

1. Who will the beneficiaries be? The easiest part for the creator of a trust for minor children is to pick the beneficiaries of the trust. You are probably already well acquainted with your own children, so let’s just assume you are going to pick them and we’ll move on.
2. What assets will be placed in the trust? List the assets that you want to be protected by your trust.  You’ll want to consider every aspect of your financial life:  checking accounts, savings accounts, stocks, bonds, mutual funds, real estate, jewelry, vehicles, boats – anything of value that you’d like to pass on to your children.  Trusts are best suited for assets that tend to increase in value, but anything of value will do.
3. Who will the trustee(s) be? Trustees have a lot of power over the assets in a trust before they are distributed to the beneficiary.  Because of this, you are going to want to make sure that you can trust this person or people.  Many people pick a family member who has the best interest of the children in mind.  The upside of choosing family is that they rarely charge a fee to administer the trust.  The (huge) downside is that being a trustee can require a high degree of financial expertise depending on the size of the trust.  As a result, many trust creators with a large amount of assets decide to hire a professional from a well-respected financial institution.  If you choose a family member or a friend, you also should consider a back up in case they become unable to fulfill the duties of the trustee.
4. What conditions will be placed on the assets? These conditions will depend on how much money is in the trust, how many beneficiaries there are, the personalities/ages of the beneficiaries, and, of course, your wishes for how the money is used.  Here are some aspects that you’ll want to consider:
1. When can the beneficiaries access the money?  Many trusts distribute money for a specific reason, but also have contingency provisions.  For example, it could be stipulated that the money not be distributed until your child is an adult, but that it is permissible to use some of the assets at any time as long as they are used to cover medical expenses for the beneficiary.
2. What can the money be used for? You could indicate that the beneficiary have free reign of the money, but more commonly the assets are earmarked for specific purposes such as education, buying a home, or getting married.
3. When will the trust be dissolved?  Many people choose to distribute the remaining assets when the child reaches a certain age – 25 years of age is fairly common.

Many of these steps can be prepared on your own which will expedite setting up a trust for minor children. But all of them should be reviewed with your lawyer.