Many parents, particularly those who have achieved a level of wealth and success, worry about how to pass the fruits of their labors on to their children. It can be difficult for children and young adults to handle money, and it is important for the adults in the family to come up with a strategy that will be most beneficial to the entire family.
Trust Funds for your Childs Future
One option is of course to simply gift the money to the children, and in some cases this can be a sound strategy. “mistype of gifting generally works best when the children in question have already demonstrated a level of financial savvy and financial responsibility. For instance, a young adult who has completed his or her education, is free of debt and has a well-paying job may be a candidate for such a gift.
On the other hand, a financial irresponsible young adult, or a person who is riddled with debt or suffering from a drug or alcohol problem could be harmed as much as helped by a sudden influx of cash. Such an individual is likely to blow the money and be left with nothing, or worse, use the funds to get themselves deeper into trouble with alcohol or drugs
Parents who want to pass on their money but not the potential problems that can come with it may want to consider setting up a trust fund for those children and young adults. Unlike a gift, the money in the trust fund can be doled out over time, with the monthly, quarterly or yearly amount determined by the giver.
The giver is also free to determine the age at which the beneficiary is eligible to receive the funds Additional limitations can be set as well, such as a requirement that the young adult finish school or be gainfully employed. This type of arrangement helps parents know that their children will be taken care of while at the same time gaining the reassurance that the money remaining in the trust will remain safe.