There are a lot of reasons to consider setting up trusts for your children, but trust and estates lawyers in Houston see far too many cases where this just is not done. One of the biggest reasons for not setting up a trust could be that you feel you do not have enough assets to warrant one. We hear about “trust fund babies” and automatically think of the super wealthy, not regular folks like ourselves.
Really, though, even those in the middle class should be thinking about setting up trusts for their children. Even if you do not have a lot of extra money lying around, you have other assets that can quickly add up in value. Add to that the payout from a life insurance policy, and you suddenly realize that you have quite a bit of financial worth that might be left behind to children who are not ready to handle it. Anything more than about $100,000 is reasonable to consider putting into a trust for children.
What Does the Trust Do?
When you set up a trust with your trust and estates lawyer in Houston, you will discover that there are many different ways to use this tool. One of the most important benefits of a trust is that it allows you to stipulate how your children will use the money you leave behind. If your intention is for your kids to use the money for college, but they want to use it to buy a sports car instead, what is to stop them?
In your case, the trust is what can stop them. You can implement restrictions on how the money is spent. You can, for example, determine that the funds in the trust are designated for specific functions, such as paying for education or day-to-day expenses. In some cases, there is a designated adult to help keep things on track, although this person must be chosen wisely. In other cases, the parent sets age limits on the trust, assuring that the children do not have access to the money until they have more time to mature.
Protecting the Trust
Another reason to consider a trust is to protect your children’s money from misuse by the adult in charge of the funds. In the case of a “custodial” account, the person in charge can have a lot more say in how the money is spent. This could translate into frivolous expenses, including paying himself or herself an unrealistic amount to “manage” the funds. With a trust, however, the person in charge (the “trustee”) is held more accountable and is required to follow your wishes.
If the trustee does manage the funds poorly, it is also possible that your child would have some legal recourse, as the trust is a legal contract.
Talk to a Houston Trust and Estates Lawyer
The best way to determine if a trust is right for you and family is to talk to a Houston trust and estates lawyer. Our attorneys are available to sit down with you to review your estate plan and consider how a trust or other estate planning tools can best meet your needs. To schedule a planning session, call us at (281) 845-8538 and mention this article.