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Understanding Trust Funds Tell a Friend

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You’ve probably heard the term, or maybe you have a friend who is called to or referred to as the trust fund baby. Aside from the jokes, and sometimes insults that come associated with trust funds, some of you may be wondering what exactly a trust fund is? You may also be wondering in spite of any negative comments, how you could set one up for your child or children. If so, then continue on as we explore the world of the trust fund, how it works, and if it’s in your budget and why people are constantly debating about it.

There are many different types of trust funds, but let’s focus on the one that focuses on your child’s financial future. As it is most commonly known these funds are set up so that when your child reaches a certain age they will not only be in charge of these funds, but they will also have a certain amount of money that will go to them. Now, it’s important to note that once you put your child in charge of a trust fund and once that trust fund is in their name; it is theirs for good, and from a legal stand point you no longer have control over it. Thus, this is where the debates begin as to what age is appropriate for a child to take over a trust fund or to get it, and should a child even have a trust fund set up for them at all?

Many people of whom I spoke with have taken both sides on this topic. The first side is that a trust fund is basically a bail out for your kids, and it doesn’t discipline them at all too go out and get their own job, their own money, etc. However, some have also argued that you can still discipline your child so that when they do reach the age of getting money from the trust fund or taking it over, in a way that they will appreciate it more, because they too have their own money from their hard work. Personally, if a child has a trust fund set up, I feel that they should simply not know about it for a while. After all, you can’t look forward to what you don’t know is coming, and you can build financial responsibility along the way.

The debate will probably never end over the trust fund, and its necessity or lack their of for a child. Still, it’s a personal decision that must be made regarding ones financial future, and the future of their children, and therefore it is worth looking into.

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