questionstoday.com

Tips for Choosing the Best Child Trust Fund

101 1
Since a child trust fund is created to provide financial security or educational funds for minor children it's important to become educated about the different types. Other important information to understand is IRS regulations and proper funding protocol.

People who want to establish a child trust fund account typically get help from an estate planning lawyer. This is a smart approach because attorneys can help individuals choose the right type and weigh the pros and cons of each. They can also advise ways to minimize taxes.

College Trust Funds

College trust funds are one of the most popular methods to set aside money for future education needs. This type necessitates getting familiar with gift tax exclusions. To qualify for annual exclusions, the tuition has to be paid to the college from the trust fund account.

Educational institutions can include any state colleges, trade schools, and preparatory schools which are accredited by the state. Additional criteria might be required based upon the type of school and formal education.

Currently, the annual gift tax exclusion is limited to $14,000. However, the IRS does not impose limits when monetary gifts are provided exclusively for tuition. It is imperative to speak with a certified public accountant to ensure financial gifts comply with regulations.

College trust funds can be a great way to provide for education, but it's best to review all available options. One alternative many people find attractive is testamentary trusts.

Testamentary Trusts

Testamentary trusts are different than other types. Instead of setting up the account ahead of this, these trusts are arranged after a person has died. Decedents provide directives in their last will and testament.

Testamentary trusts are a good alternative for providing financial security to minor children if parents pass away. Parents can bequeath titled property and financial gifts which are protected by the trust until children become adults. A Trustee is assigned to manage the trust in accordance with the Will.

While testamentary trusts provide financial means to ensure children are taken care of the assets might have to endure the probate process prior to being placed into the trust. It is recommended to get help from an estate planning law firm and develop strategies which can avoid probate and minimize inheritance tax.

Irrevocable Trusts for Minors

People who want to protect estate assets and qualify for gift tax exclusions often turn to irrevocable trusts for minors. A few of the most common are Section 2504(b), Section 2504(c) and Crummey trusts.

Section 2504(b) trusts are a good option for those who want to supply annual income to the guardians of their children. These funds are used to cover basic living expenses, education, and healthcare expenses.

Section 2504(c) trusts are used to protect inheritance property until minors reach adulthood. Crummey trusts can be a good choice for students who attend law or medical school since the gift tax exclusion is extended beyond the age of 21.

Once irrevocable trusts are established they cannot be altered without a court appearance. All types of children's trust funds must be in compliance with IRS guidelines to avoid tax problems. The best approach is to get help from estate attorneys to assure assets are safeguarded and trusts are funded in accordance with state and federal laws. 
Source...

Leave A Reply

Your email address will not be published.