Setting up a trust fund for your child can seem tedious and complicated – not to mention disheartening! While nobody likes to think about what will happen to their children after they die, it’s important to do so – especially if you have significant assets or a large life insurance policy.
Once you’ve decided to set up a trust fund, what next? Let’s take a look at some of the biggest mistakes people make when setting up a trust fund.
A common mistake is neglecting to consider the trust fund’s purpose. When and how should funds be distributed to the child? Will it be done every few years, or should funds be withheld until the child reaches a certain age? Should there be stipulations on the distribution of funds, such as future earnings?
No matter how you set up a trust fund, it’s wise to approach the process with intentionality and thoughtfulness. Consider each child and their respective situation, and determine what would be best for them.
Choosing a Trustee
Selecting the custodian of a trust is one of the most important steps of the process – yet many people fail to choose the proper type of person for this role. Whether you designate a single trustee (one individual) or co-trustees (two or more individuals), it’s important to select someone trustworthy, responsible, and honest.
List the people in your life who meet these standards. Perhaps a sibling or lifelong friend fits the bill. Try to think of three to five good candidates for such a role, and then whittle them down according to their strengths and weaknesses until you have your desired number of trustees.
Many people who set up trust funds hope (or assume) that the proceeds of their insurance policies will go into the trust. However, in order for this to happen, it is essential to double-check the beneficiary designations on your insurance policies to make sure they are updated.
Keep in mind that if you do not name a beneficiary on your life insurance policy, those funds will likely go through probate upon your death. Even if you have named your estate as beneficiary, you should still complete a beneficiary designation form to ensure that your wishes are fulfilled.
Setting Up a Trust Fund is Easy with Bradford & Holliman!
Are you ready to set up a trust fund? We’re here for you every step of the way! Contact us today about your trust fund needs.