Understanding Trust Funds
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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.