Basics of Establishing a Child Trust Fund
Establishing a child trust fund is not a difficult task, but does require some research. Since there are different types of trusts, the first step involves deciding which one is best suited for your needs.
The best approach for learning about various types of child trust funds is to consult with an estate planning attorney. Lawyers can provide advice about the pros and cons of each type; how to fund trusts; and tax saving strategies.
College Trust Funds
People who establish college trusts funds need to spend time learning about gift tax exclusions. In order to qualify for exclusions, college tuition has to be transferred directly from the trust to the college.
Additionally, colleges must meet specific criteria and be qualified to provide students with a formal education. Institutions must be accredited and can include preparatory schools, trade schools, and colleges.
At present, the IRS has set the gift tax exclusion limit at $14,000 per person annually. With that said, there is no limit imposed on financial gifts which are supplied specifically for college tuition as long as gifts are in compliance with the criteria established by the Internal Revenue Service.
Whenever people gift money to college trust funds they should consult with a tax lawyer to make certain they remain compliant with IRS guidelines. Otherwise, there is potential to incur tax consequences.
College savings trusts are a great option, but it's good to explore others before making a final decision. Another option worth investigating is testamentary trusts.
Testamentary Trusts
Testamentary trusts are established in a different manner than most. The trust is created after death in accordance with directives provided in the decedent's Will. This type of trust is a good way to provide for children in the event of their parents death.
Parents can leave inheritance cash and property to their children. Assets are safeguarded until they reach adulthood. A Trustee is appointed to act as fiduciary and adhere to directives.
Overall, testamentary trusts offer financial security. On the flip side, inheritance property could be subjected to probate before being transferred into the trust. It's important to talk with an estate planning law firm to establish strategies that allow avoidance of probate or simplify the mandatory procedure.
Irrevocable Trusts for Minors
Irrevocable trusts for minors are a good way to safeguard inheritance gifts while complying with gift tax exclusions. People who want to provide annual income to cover costs associated with caring for minors often choose a Section 2504(b) trust.
People who want to safeguard inheritance gifts while complying with gift tax rules typically establish a Section 2504(c) trust. Crummey trusts are a good option for students attending medical or law school because they extend the gift tax exclusion beyond age 21.
Irrevocable trusts cannot be changed without permission from the court. Every type of trusts must adhere to IRS guidelines to prevent tax consequences. It's always best to retain services from experienced estate planning lawyers to ensure trusts are properly funded and assets fully protected.
The best approach for learning about various types of child trust funds is to consult with an estate planning attorney. Lawyers can provide advice about the pros and cons of each type; how to fund trusts; and tax saving strategies.
College Trust Funds
People who establish college trusts funds need to spend time learning about gift tax exclusions. In order to qualify for exclusions, college tuition has to be transferred directly from the trust to the college.
Additionally, colleges must meet specific criteria and be qualified to provide students with a formal education. Institutions must be accredited and can include preparatory schools, trade schools, and colleges.
At present, the IRS has set the gift tax exclusion limit at $14,000 per person annually. With that said, there is no limit imposed on financial gifts which are supplied specifically for college tuition as long as gifts are in compliance with the criteria established by the Internal Revenue Service.
Whenever people gift money to college trust funds they should consult with a tax lawyer to make certain they remain compliant with IRS guidelines. Otherwise, there is potential to incur tax consequences.
College savings trusts are a great option, but it's good to explore others before making a final decision. Another option worth investigating is testamentary trusts.
Testamentary Trusts
Testamentary trusts are established in a different manner than most. The trust is created after death in accordance with directives provided in the decedent's Will. This type of trust is a good way to provide for children in the event of their parents death.
Parents can leave inheritance cash and property to their children. Assets are safeguarded until they reach adulthood. A Trustee is appointed to act as fiduciary and adhere to directives.
Overall, testamentary trusts offer financial security. On the flip side, inheritance property could be subjected to probate before being transferred into the trust. It's important to talk with an estate planning law firm to establish strategies that allow avoidance of probate or simplify the mandatory procedure.
Irrevocable Trusts for Minors
Irrevocable trusts for minors are a good way to safeguard inheritance gifts while complying with gift tax exclusions. People who want to provide annual income to cover costs associated with caring for minors often choose a Section 2504(b) trust.
People who want to safeguard inheritance gifts while complying with gift tax rules typically establish a Section 2504(c) trust. Crummey trusts are a good option for students attending medical or law school because they extend the gift tax exclusion beyond age 21.
Irrevocable trusts cannot be changed without permission from the court. Every type of trusts must adhere to IRS guidelines to prevent tax consequences. It's always best to retain services from experienced estate planning lawyers to ensure trusts are properly funded and assets fully protected.
