A trust is an effective tool for parents or guardians to ensure a child who lacks financial management skills can benefit from a large sum of money through a steady, lifelong income stream. By establishing a trust, the you can protect the child’s inheritance from mismanagement, creditors, or impulsive decisions, providing financial security and peace of mind.
In a trust, a trustee manages assets for the beneficiary—the child—according to your terms. This structure prevents the child from receiving a lump sum they might not be ready to handle. Instead, the trust can distribute funds gradually, such as monthly or annual payments, to cover essentials like education, healthcare, or living expenses. These distributions can be tied to milestones, like reaching a certain age, ensuring the child’s needs are met without overwhelming them.
Trusts offer flexibility and protection. A “spendthrift” clause can shield assets from creditors or exploitation, safeguarding the child’s future. The grantor can appoint a trusted trustee—such as a family member or financial institution—to oversee distributions, ensuring they align with the child’s best interests. Additionally, the trust can include provisions to encourage financial literacy, such as requiring the child to complete a budgeting course before accessing larger funds, fostering responsible habits over time.
Tax benefits may also apply. An irrevocable trust, for example, can reduce estate taxes, preserving more wealth for the child. Consulting an estate planning attorney is essential to optimize the construction and the advantages of a trust.
In summary, a trust provides a controlled, sustainable income stream for a child unprepared to manage significant wealth. It protects assets, promotes financial responsibility, and ensures lifelong support. With careful planning, a trust is a lasting gift that secures a child’s financial future while empowering them to grow into independence.
This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All views/opinions expressed in this article are solely those of the author and do not reflect the views/opinions held by Advisory Services Network LLC. Advisory Services offered through U.S. Asset Management, a member of Advisory Services Network, LLC. 900 Ashwood Pkwy, Suite 500, Atlanta, GA 30338
U.S. Asset Management is a family office offering investment management and financial planning services. We help clients make better decisions with their money and assist with overseeing every aspect of their financial lives. David Cross is a Certified Portfolio Manager, Investment Advisor Representative and David Cross is a CDFA® practitioner or Certified Divorce Financial Analyst® practitioner.
