Establishing A Trust When The Beneficiary Is A Minor
Trusts are a popular estate planning tool, and not just for wealthy people. By placing assets in a trust, you can keep them from being part of your estate that goes through probate; therefore, the beneficiaries can inherit them more quickly and more easily. You can even set up a living trust with yourself and your spouse as beneficiaries; this trust can pay for your long-term care and other expenses related to old age, while keeping the funds in the trust separate from the funds that will become part of your estate. Many grandparents choose to set up trusts specifically for their grandchildren. If you do this, you can avoid the uncertainty of whether the money that your children will inherit from you will last for another generation. In some cases, the beneficiaries can begin receiving payments from the trust while they are still minors. To find out more about setting up a trust that will benefit the youngest generation of your family in the short term and the long term, contact an Orlando estate planning lawyer.
2503(b) and 2503(c) Trusts
Section 2503(b) trusts are for the benefit of a beneficiary who is a minor when the trust is established. They pay distributions to the minor beneficiary’s guardian, to be used for the minor beneficiary’s expenses, every year until the beneficiary turns 18, at which point the beneficiary may choose to withdraw any amount from the trust, as long as the amount withdrawn in a calendar year does not exceed that year’s annual gift tax exclusion. When the beneficiary turns 21, the distributions must begin to be drawn on the principal of the trust, if they have not already done so, and the distributions continue until the money in the trust runs out.
A 2503(c) trust is like a 2503(b) trust except that it automatically dissolves and pays the beneficiary a lump sum when the beneficiary turns 21. This is a good choice if you want to make your grandchild financially independent of his or her parents, but you should choose 2503(b) if you are worried that the young adult beneficiary will burn through the inheritance quickly and end up in a bad financial situation when you are no longer around to help.
One Trust for the Whole Family
If you want to provide for multiple grandchildren, one way to ensure that they get equal shares is to set up a family trust, also known as a pot trust. This trust pays out distributions to the beneficiaries each year until the youngest beneficiary turns 21. Then the trust dissolves, and each beneficiary receives a lump sum payout.
Contact Gierach and Gierach About Establishing a Trust for Your Grandchildren
An estate planning lawyer can help you think through the consequences of setting up a trust for your grandchildren or other family members who are minors and choose the trust structure that best suits your purposes. Contact Gierach and Gierach, P.A. in Orlando, Florida to discuss your case.
Source:
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0736/Sections/0736.1106.html
