Trusts can be used for many reasons- to restrict your minor child’s access to money until set ages that you determine, to be the secondary beneficiary on a life insurance policy, to plan for estate taxes, to hold money for a special needs child or person who is on governmental benefits, such as Medicaid, and more.
There are three parties to a trust- the settlor, trustee, and beneficiary. The settlor is the one who owns the assets and sets up the trust. The Trustee is the person who gets the assets from the settlor so that the trustee can hold the assets on behalf of the beneficiary. The beneficiary is who receives the benefit from the trust assets.
Why would I need a children’s trust?
If you do not leave the forced portion of your estate to trust, your children will be allowed to inherit their share at age 18. A tutor (whom you designate in your will) will be in charge of their money only until they turn 18. At that time, they will receive the lump sum regardless of how large the inheritance is. We suggest doing a trust so that you could have a trustee (person in charge of the inheritance for your children) who will disburse payments to your children as they reach certain ages and pay for their health and educational expenses whenever needed, regardless of age. Further, you could set aside insurance money in the event of your early death and have it restricted for the benefit of your children.