Some believe you must be very wealthy in order to establish a trust. We're here to assure you that this is not the case.
Essentially, a trust is simply an estate planning measure you can use to help your family retain assets on behalf of a beneficiary. In the case of a minor trust, the beneficiary would be your child, because this is who will receive the funds from the trust based on the terms agreed upon in the document.
If you have a young child, you may wonder about the different types of minor trusts you can create for your children. A minor trust is a trust account set up for a minor child, and the funds in the account are used to provide for the child's needs.
It's important to consider that establishing a trust for your minor child can help prevent them from squandering away an inheritance. When the funds are placed in a trust, they can be used for specific purposes, such as education or medical expenses, and this can help your child make the most of their inheritance.
There are several types of minor trusts, including special needs trusts, education trusts, and children's accounts. Read on to learn more about the different types of minor trusts and how they work.
Types of Minor Trusts
When saving for a child’s future education, there are three primary types of accounts to consider – a special needs trust, a 529 plan, or a children’s trust.
Special needs trusts, 529 plans, and child's trusts have their pros and cons. It's important to carefully consider all of the factors before making a decision on which option is best for your family.
Special Needs Trusts
Establishing a special needs trust for your child with a disability can be a great way to help protect their assets while still being eligible for the benefits they receive from the government. This type of trust can cover a percentage of your child's financial needs that are not covered by payments for public assistance.
Proceeds collected from a trust of this nature are often used for medical costs, caretaker expenses, transportation costs, and other allowable expenses.
529 Plans
A 529 plan is a tax-advantaged savings plan that can be used for qualified education expenses, such as tuition, fees, books, and room and board. This makes them an appealing option for parents who want to save for college. Although, it is important to consider that 529 plans are only eligible for federal financial aid for educational purposes if the account balance is less than 5% of the student's total cost of attendance.
The money in the account grows tax-deferred, and withdrawals are tax-free as long as they are used for qualified expenses. 529 plans are sponsored by states or educational institutions, and there is usually no limit on how much you can contribute. However, there may be state tax benefits available if you invest in a plan from your resident state.
Children's Trusts
Children’s trusts are another type of tax-advantaged account that can be used for a variety of purposes, including education costs. With a trust, you can specify how and when the money in the account can be used. For example, you could set up the trust so that withdrawals can only be made for tuition expenses after the child reaches age 18.
We Can Help Provide Financial Solutions for Your Family
If you're looking to secure your child's financial future, a minor trust can be a good option for your family. Our team has helped many other families with their financial goals and we will do our best to help you and your family too. Don't hesitate to reach out to our skilled team right away to learn more about what we can do to help.
Call Legacy Enhancement Trust today at (888) 988-5503 to learn how we may assist you!