Establishing a trust for one’s child isn’t as common a practice as having a piggy bank, but the concept has similar roots: to financially prepare for your child’s future. However, unlike the friendly porcine bank on your child’s dresser, a trust requires careful consideration and planning. According to a piece by Bowditch & Dewey on JD Supra, the decision isn’t as clear cut as simply deciding whether or not to crack open a piggy bank.
The major question lies in whether a trust is the right structure to protect your child’s financial future. A trust can protect assets, but it can also complicate matters. Issues can arise revolving around control and access to funds and the responsibility that comes with managing a trust’s assets.
A trust can be an essential planning tool under the right circumstances. For instance, in the case of a minor child, or when he or she has issues with money management, a trust can be a means of ensuring they will be financially secure in the future. Moreover, trusts can offer certain tax benefits and protect assets from creditors.
However, there are drawbacks to consider. Trusts require time to establish and manage, and there may be administrative fees. A trust also adds legal complexity, and if your child becomes embroiled in a legal dispute, a trust could become a liability. Furthermore, control issues may also surface. For instance, beneficiaries can sometimes feel controlled or undermined by the trust or the trustee’s decisions.
In conclusion, setting up a trust for your child isn’t a step to be taken lightly, and the decision should be based on careful consideration of your child’s needs, your financial situation and the future practicalities. Seek guidance from a lawyer or financial advisor to ensure that you make the right choice for your child’s future.