If you’re beginning the estate planning process, it’s best to make sure that you think of those closest to you.
Perhaps the most important of those people are your children.
Whether you’re saving for their college or simply for their future, it’s common for parents to want to put a little money to the side for their kids.
One of the easiest ways to do this is to create a Virginia Trust Fund.
A Virginia Trust for children is when you leave property, money or any facet of your estate to your kids.
The only caveat is that in most cases you must assign a Trustee to monitor those assets until the child is of legal age if your child is a minor.
Once you’ve figured out which of your property will go to your children, you must now find the trust that best fits your situation.
Types of Virginia Trusts For Children
Uniform Transfers to Minors Act (UTMA)
The UTMA grants minors the opportunity to receive parts of your estate so long as there is an adult (custodian) to manage it until a certain age.
By creating a living trust for your child, they’ll have control of the property once their age permits it.
In Virginia, the age for release of property to your child is age 18. If necessary, you have the option of extending it to age 21.
Often times, the property manager you choose is also the designated guardian of your child if you pass away.
It’s important to choose someone that you can trust and who has your child’s best interest.
It’s also common to designate a back up alternate property manager in case your original choice can’t.
Advantages to creating a UTMA trust include:
- The Cheapest trust (tax-wise)
- The most simple of all options
- State infused
- Most common
Child Virginia Trust
Another option for leaving property to your children is by creating a child trust.
With a Child Trust, you assign property from your estate to your child through a living trust.
With that said, the key difference between the UTMA and a Child Trust is that the trustee can manage the property as long as you want them to, exceeding the age limit designated in the UTMA.
For example, if you give your child the rights to your house and car but you don’t want them to take control over the property until they are 30 (as opposed to 18), you can create those guidelines with a Child Trust.
Family Pot Virginia Trust
Another option for giving some of your estate to your children is by creating a Family Pot Trust.
With this, you essentially follow the same steps as a child trust but with a few wrinkles.
Instead of having designated property go to one child individually, you can leave some of your estate to multiple children for them to share and pick over.
Advantages to Child and Family Pot Trusts
A significant benefit to creating either child or family pot trusts is avoiding what is known as probate.
Probate is the court process through which property in your estate passes to your beneficiaries.
In addition to being costly probate has a tendency to be messy for all parties involved.
Fortunately, by option to use either of these two trust methods, you could prevent most of your estate from passing through probate.
Another positive to these two options is the fact that you can determine how long your children have to wait to have access to the estate.
Giving children expensive and valuable property at a young age can be problematic depending on their maturity.
Thus, these options allow you to take the safe bet and set the property’s release at an appropriate age to ensure the best possible result for your children.
Lastly, if your estate is an expansive and expensive one, it could be best to resort to one of these two options instead of the UTMA for various reasons.
The larger your estate, the more cautious you should be of passing it on to your kids. Under the UTMA, your kids will have access to it as early as 18.
Though your child may be level-headed and mature at age 18, they may not be prepared emotionally or financially to receive a large sum of money.
However, if your property is small and doesn’t require that much security, the UTMA may be your best bet.
(If you’re looking for a method to give your children money for college, you might want to look into a 529 Plan.)
Any of these three options will give you great opportunities to give your children parts of your estate and avoid the probate process.
Which kind of trust you use depends on your needs and preferences.
An attorney can help you choose between these options and develop the estate plan that works best for you.