What you need to know before setting a Trust Fund up as a Parent

Overview

As a parent, providing the best life for your children is often a driving force behind all of your hard work. Something that should also be a priority beyond providing for your children now, is being able to save for their future.

This is why it can be beneficial to set a trust fund up as a parent for your children.

What you need to know about setting a trust fund up as a parent:

Do your research first. There are two main types of trusts you can set up:

• Testamentary (created by a will)
• Inter Vivos Trust (created by a contract in the form of a trust deed)

You also need to consider tax implications of setting a trust up as a parent for your children. Many factors are considered when determining the income tax and capital gains tax liabilities.

There are various costs involved, including drawing up of a trust deed, an acceptance fee, annual trust administration fees and distribution fees.

It’s vital for parents to have a financial plan in place for their children.

Think through who you want to have as a trustee of the trust. It’s crucial to have the right people in charge; otherwise this could have adverse effects on your plan.

Be clear about the goals of the trust and make sure that appointed trustees are notified too.

Be clear about when and how money can be distributed to the children. You should be specific about this so there is no confusion which could lead to your children not having access to the funds they need. Make sure that you talk to your children about the purpose and intentions of the trust.

Be clear about beneficiary designations.

Ensure that all details are up to date.