Mind of Money

September 17, 2018 at 7:11 am

Trusts for Minors: Leaving Money and Property to Your Kids

a lawyer consulting a familyMinor’s trusts, trusts for minors, or trusts for children are particular kinds of trusts used for holding and distributing assets to minor kids. These typically dictate the property and money assets that would be held in a trust until the beneficiary is 18 or 21 years old. The settler, the one establishing the trust, might put conditions that should be satisfied for the beneficiary to claim assets in the trust. For instance, the beneficiary could only receive the assets once he or she graduates from college or marries.

Requirements for a Valid Trust for Minors

For a minor’s trust to be considered valid, it should meet basic qualifying requirements for trusts, according to a probate attorney in Denver.

  • The only beneficiary stated in the trust is the minor.
  • All original assets, as well as income generated by the trust, should be transferred to the beneficiary once they’re of the age of majority, which is 18 or 21 years old, depending on state law.
  • The beneficiary is allowed to distribute the assets held in trust if he or she passes away before reaching the age of majority. For example, he or she could state how assets in the trust could be distributed whether in a valid will or another valid, legal document.

Advantages of Setting Up a Trust for Minors

The most important benefit of leaving assets in a trust for your child is the tax exemptions. In general, parents are allowed to gift their children money without tax consequences, but only up to a set amount. This is called the gift tax exemption.

But for you to qualify for this tax exemption, your child should have immediate access and control over your money gift. This means that standard trusts don’t qualify for the gift tax exception because the beneficiaries don’t have immediate access and control over them.

Establishing a minor’s trust for your child is a complicated matter since you need to take into account various considerations because the trust won’t be claimed for many years to come. That said, consult a local attorney for help in drafting a trust for your child to ensure that it’s valid.