Create a TRUST FUND for my child

It used to be that only the Rockefellers set up trust funds for their children and grandchildren. Today, with ordinary people becoming millionaires through the increased property value of their homes and stock market-driven accumulations in their company retirement plans, trust funds are becoming more commonplace. Parents and grandparents in this category are undertaking estate planning to preserve their wealth and minimize death taxes. This means good news to the younger generations.

Trusts are set up to provide certain benefits for all concerned:
- Protection of assets for the beneficiary. The property in the trust is managed by a trustee. Usually, this is someone who's good at handling money. It can even be a parent (although this may not be a good idea tax-wise) or a trust company. Having a trustee in charge means that the beneficiary can't squander the property; it's protected for his benefit.

- Tax savings for the person setting up the trust. There are income, estate, and gift tax advantages to using a trust.

- Grandparents who are wealthy may be especially interested in making gifts in trust to their grandchildren. Grandparents can do this while they're alive or can leave money in trust when they die. Grandparents whose own children are wealthy in their own right might not want to complicate the estate plans of their kids, so they leave money to the grandkids.

- A Kid's Rights in the Trust.Once you put money in a child's name, it's his. You can't get it back, even if you need it. (Of course, the same is true of any gift you make.) As beneficiary of the trust, your child is entitled to whatever income and principal from the trust that the trust document says he's entitled to. Usually, this is only the income while he's a minor.

When do you tell a child about being a beneficiary of a trust? There's no magic age because it depends on your circumstances. Does he need to know? What would happen if he knew? As a general rule, it's always a good idea to give as much information about financial matters as your child can handle. There's no point in telling a 10-year-old that there's a million dollars sitting in trust that Grandma funded for him. But as a child gets older, this can ease concerns about being able to pay for college or do other things—plus, you can start to prepare him to handle his money.When the trust ends and whatever remains in it is distributed to the child, he's usually entitled to an accounting from the trustee. This means that the trustee must show how the money has been spent over the years. If the trustee has acted in violation of the terms of the trust or state law, then your child has a lawsuit for damages against the trustee.