Many have the perception that trusts are only for the super wealthy. In fact, a trust is a legal arrangement between the settlor (you) and a trustee (appointed by you) who can administer and manage your assets for the benefit of your beneficiaries.
For parents, setting up a trust for your children is a way to protect and manage your assets for their benefit, both during childhood and as they grow up into adults.
Here are some reasons why a trust may be beneficial:
Protecting your assets: A discretionary trust can protect your assets from potential creditors, or lawsuits. By transferring your assets to the trust, you can ensure that they are held separately from your personal assets, and hence are less vulnerable to claims against them.
Providing for your children’s future: By setting up a trust, you can ensure that your children are provided for in the future. You can set specific terms for the distribution, which can include conditions for their education.
Maintaining control over how the assets are distributed and used: This can be particularly important if your child/children is/are too young or immature to handle finances or if there are concerns about how he/she/they will manage the assets.
Estate planning: A trust can be a useful tool for estate planning, allowing parents or guardians to pass assets to their children in a controlled and tax-efficient manner.
Tax planning: A discretionary trust can be an effective tax planning tool, as income or gains generated within the trust are taxed separately from your personal income.
Asset management: By appointing a trustee, you can ensure that your assets are managed according to your wishes. This can be particularly important if you have specific investment goals in mind.
Flexibility: A discretionary trust can be structured to provide greater flexibility for your family’s changing needs over time. For example, you can add or remove beneficiaries, change the terms of the trust, or appoint new trustees if needed.
Special needs: If your child has special needs, a trust can be set up to provide for their ongoing care and support. This can include medical expenses, therapy and other necessary services.
Overall, setting up a trust for children can provide peace of mind for parents or guardians, ensuring that their assets are protected and managed with a valuable tool for wealth preservation and estate planning. It can offer you and your family peace of mind and security for the future.
However, this can be a complex process and requires careful consideration of your individual circumstances, so it is important to seek professional advice before proceeding. I would be happy to share my insights.
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