How to ensure money in an educational trust for children

On Behalf of | Jun 9, 2022 | Trusts

A trust fund is a legal entity that holds assets for the benefit of specific organizations or people. Children are usually the beneficiaries of trusts because trusts safeguard assets in Arkansas. Many families create trusts to use assets for children’s stewardship.

Guaranteeing funds for children

The primary benefit of trusts is that they protect assets from legal claims. Possible exceptions include assets subject to seizure and retirement savings, but assets in trusts have legal protection. After a business failure, a person may file bankruptcy, but the trust can protect their children’s targeted savings or investment accounts. The trust also helps protect assets during a lawsuit for civil liability.

Ensuring funds are available for long-term

The owner can control how the beneficiaries receive the money. The beneficiaries receive assets over several years or in a lump sum. Beneficiaries can even receive payments monthly, quarterly, semiannually or annually. The owner can make sure that the trust is available but not spent too quickly.

Young children who are beneficiaries of a trust may even have a guardian to disperse money. Young adults can have guardians if the family doesn’t trust them with money. Some trusts may have an age that the beneficiary must reach before gaining access to the funds. Payments may be until a certain age before the remaining funds are a lump sum.

Using the money for the intended purpose

Along with funding the trust and dispersing the assets, a person can determine specific purposes for distribution. The wording of the trust can include college, education, childcare, starting a business, buying a home and more. Parents may have children with poor spending habits, gambling disorders and substance abuse problems. Such children would benefit from restrictions on their trust fund. Ensuring that money is only used for education makes sure that it is available at the right time.

Trusts can provide for the beneficiaries, even if the parents aren’t physically there anymore. An appointed independent trustee can take over dispersing the funds to the beneficiaries after the owner’s death.