Trusts are used for a variety of planning purposes. One such use is a trust commonly included in wills. It is a minors trust. A minors trust allows you to place any inheritance that would be received by someone under the age of 18 into a trust.
The trust then functions in several ways. First, it allows the minors caretaker to gain access to the funds for the health, education, maintenance and support of the child. These provisions give the trust flexibility to respond to the situation as it develops. There is no need to foresee a medical condition or contemplate private school.
Second, although it is called a minor’s trust you can compel creation of the trust for a person under any defined age. By creating a trust for all beneficiaries under 25 you can prevent a young adult from making some foolish choices while still paying for their college.
Finally, the trust assets can be distributed in full at a defined age or a series of disbursements can get arranged. This might look like a 25% disbursement at 25 and 30 years of age followed by full disbursement at age 35. As long as the trust is in force the beneficiary can gain access to the funds for their health, education, maintenance and support.
If the trust includes spendthrift provisions then it will be protected from the beneficiaries creditors. If they owe money the creditor cannot gain access to the assets held by the trust. The creditors can go after money as it is disbursed to the beneficiary within the guidelines of the law.
A trustee should be named in the will creating the minors trust. The trustee can be the same person caring for the children but does not have to be. This is particularly helpful if you feel the correct person to raise your children is not the best person to manage money.