Every parent wants to make sure their child has a good life. Tragedy can strike at any time, leaving your children without someone to take care of them. If this happens, a well-constructed estate plan can protect your child’s inheritance until they are old enough to be financially responsible. One way to protect your assets for your children is through a minor’s trust. It allows you to give the gift of financial security to your children without worrying about taxes.
But to set up a minor’s trust, it’s best to speak with an experienced estate planning attorney to help you through the process. At Martin Heller Potempa & Sheppard, PLLC, our Tennessee estate planning lawyers have been working with families across Middle Tennessee to protect their assets for their children. We can help you with drafting, reviewing, and implementing the trust, so no issues arise after you are gone.
How a Minor’s Trust Work
Trusts for minors protect the assets and property of a child until they can be financially responsible. The trustee, who must be over the age of 18, will care for the property and assets until such a time when the child reaches an age of majority. In Tennessee, theminimum age of majority is 18, but the grantor of the trust can choose another age.
Once the minor child comes of age, the beneficiary will receive notice that the assets of the trust are available. The recipient has up to 60 days to claim the assets.
If the beneficiary fails to claim the assets within the 60-day window, the funds will remain in the trust. During this time, they will not be in the beneficiary’s control. The heir may not regain access for a specific period of time, usually between 5 to 10 years.
The Benefits of a Minor’s Trust
The purpose of a minor’strust is to make a gift to a minor while avoiding any federal gift taxes, also known as a “gift tax exemption.” Though the state does not have a gift tax, the federal gift exemption is $15,000 per year for the gift of each recipient. Anything over $15,000 must be reported to the IRS. Although the youth does not have immediate access to the trust, the gift tax exemption still applies to this case.
For the trust to qualify for tax exemption, it needs to meet the following requirements:
The minor is the only stated beneficiary of the trust.
The assets and income of the trust are transferred to the recipient once the child reaches the age of 21.
The minor has the right to distribute their trust assets if he/she passes away before reaching the age of 21. For example, your child can state how to distribute the trust after his/her death in a legal document or will.
When A Child Is Named A Beneficiary of Other Documents
If a child is not named in a minor’s trust, there are other ways a child can receive an inheritance. If a person dies, he or she may name a minor in a will; however, just as in a minor’s trust, the trustee will manage the accounts until the child comes of age.
In addition, if a person dies and leaves money to a child directly, or as a beneficiary of a life insurance policy or a retirement account, a property guardian to manage that child’s money will be appointed until the child is of age.
When a child is named the beneficiary of a trust, the trustee will distribute the funds of the trust until the child reaches the predetermined age, under the established guidelines.
For example, if the trust establishes that the child is to receive the funds at the age of 25 for health, education, or support, that is how the trust must be used. However, once the child reaches 25, the child can now manage and distribute the money at their will.
Contact Our Nashville Trust Attorneys Today!
Setting up a minor’s trust can be difficult, especially if you have a high-value estate. You need to specify your intentions in your estate plan. This includes choosing the right trustee to oversee its maintenance after you are gone. Remember, this is your child’s future – it needs to be secure.
For decades, the trust lawyers ofMartin Heller Potempa & Sheppard, PLLC have helped people across Middle Tennessee prepare a trust. We have helped our clients not only select the best person to administer the trust but have stepped in as trustees. We know the complex issues surrounding building a secure trust for your child and will do everything we can to make sure everything runs smoothly.
If you are considering creating a minor’s trust and need help with the administration of that trust, don’t delay.Contact Martin Heller Potempa & Sheppard, PLLC now for more information.