How to set up a Trust for a child?

Before knowing how to open a trust fund, it is essential to understand the basic types of trust. There are different categories of trust established for different purposes. Hence, determining the type of trust appropriate for your purpose is essential. The following are the three primary types of trust:

• Revocable Trust

In a revocable or living trust, you cannot modify the terms at any time, according to the grantor. Hence, it provides flexibility and income to the grantor. Moreover, the grantor can change the terms, remove assets, and terminate the trust in a revocable trust. However, since there is considerable control over the trust, a revocable trust is subject to seizures from creditors and third parties.   Generally, a revocable trust is helpful to avoid the lengthy and complex probate process. Also, a revocable trust does not provide estate tax exemption. In brief, this kind of trust helps in estate planning.

• Irrevocable Trust

On the other hand, you cannot change a revocable trust. And you cannot remove the assets in the trust for any reason. That said, an irrevocable trust provides tax exemption as the assets cannot be altered. Also, it protects your assets from creditors. The disadvantage of this trust is that you cannot revoke the assets and terms. But it provides absolute protection for your assets.

• Testamentary Trust

A testamentary trust is effective upon the grantor’s death. You can create it through a will, which includes the terms of the trust. A testamentary trust is an excellent instrument to establish trust for minor children and a surviving spouse. They can inherit a portion of the estate through a testamentary trust upon the grantor’s death.   Besides, in a testamentary trust, an estate goes through the probate process, and the executor probates the will and creates the trust. Also, you can create it through a will, and you don’t need to pay for stamp duty. Other trusts Besides the three types of primary trust, you can create a few other trusts for specific purposes.

• Special needs trust

A special needs trust provides financial assistance for an individual with disabilities. Besides,   setting up a special needs trust for an individual doesn’t reduce their eligibility for government benefits (Social Security, Supplemental Security Income, Medicaid). The beneficiary’s eligibility for the trust is below 65 years of age. Furthermore, the trust should function for the benefit of the beneficiary. Also, the trust pays for costs excluded from Medicare or Medicaid.

• Family trust for real estate

Setting up a family trust for real estate is a preferred choice for numerous reasons. The primary reason is to avoid probate. When you inherit property through a will, the probate process is inevitable unless it is a “small estate.” Further, the beneficiaries and heirs must wait for several months or even years for the bestowal of the estate. A trust saves time and money involved in probate. Besides the distribution of assets upon the decedent’s death, setting up a trust also covers your wishes when incapacitated.