When it comes to establishing trusts, parents must make difficult choices about how to leave their assets to their children. Although each person’s situation and children are unique, there are a few general issues that everyone should think about.

Minor children’s assets should always be held in a Trust

You don’t want to transfer assets to children under the age of 18. While they are under the age of 18, their guardian or conservator will be in charge of their finances.

Being 18 is not easy

In most countries, once the children reach the age of 18, the guardian must relinquish control of the assets to them. When you’re 18, a £2 million inheritance seems like it’ll last a lifetime. It certainly can if you are prudent and frugal. However, the majority of 18-year-olds will spend the trust fund on a lifestyle they cannot afford. After 20 years, the 18-year-old is approaching 40 years old, with little money and no means of support.

Creating separate shares for kids in their 20’s

The majority of parents with young adult children will split the trust funds into separate shares for each child. Each child will have their own share and will be able to take money as desired. This reasonable approach takes into account the fact that each child has unique needs. Why should the other children pay the costs if one child wants to go to medical school?

Consider a lifetime trust

Another significant consideration is whether the funds should be distributed to the children in full when they reach a certain age. First, if you allow your children to withdraw trust funds, it becomes their property and is liable to creditors as well as their divorced spouse. Maintaining the funds in trust for the duration of the child’s life would offer greater liability insurance. The trustees would have discretion on how much money was distributed, but the child would never be able to claim specific amounts of money. If you’re worried about a child having creditors or possibly divorcing in the future, this is the best solution. If your child inherits £5 million and there is no prenuptial arrangement, the money will be considered a marital asset subject to division.

Protect your “problem” child

Giving a large amount of money to a child who is suffering from a substance abuse problem (drug addiction, gambling, etc.) could be catastrophic. A lifelong trust is the only way to protect a child from himself.

Gibing your kids a longer leash

If you’re confident in your child’s ability to manage money and want to give it to them at a certain age, the safest approach is to give it to them in stages. Giving the child a quarter of the assets at age 25, half of the remaining assets at age 30, and the rest at age 35 is a common scenario. You may pick any ages or percentages for this distribution. Another option is to appoint the child as a co-trustee until he reaches the age of 25, so that he becomes accustomed to handling the trust funds.

Planning for a child’s death

What happens to the trust funds if the child dies when the funds in trust remain? You have the option of directing the funds to her children, whether she has any, or to your remaining children. Some parents will grant their children special powers over their inheritance when they die. These are referred to as “appointment powers”. The idea is that after you’re gone, your child should be able to alter how the trust money is distributed among his or her own children. After all, your grandchildren could face the same problems that you did while preparing for your children: creditors, divorced spouses and addictive behaviour. If necessary, your child should be able to adjust the trust distribution. You may also allow your child to leave the trust funds to his or her spouse. Some people are strongly opposed to this, but if your child has a caring partner and they are living responsibly, you may want them to be able to maintain the same lifestyle they had when your child was alive.

Don’t let your concerns overwhelm you or prevent you from making plans. You should still listen to your attorney’s advice and then change the trust as your decisions become more stable.