Can You Create a Trust for a Minor?
As families explore the various ways to manage their estates and care for their children, they may consider the benefits of a trust. Trusts are essentially legal arrangements in which property is transferred for the future use of a beneficiary. These estate planning tools are becoming increasingly popular, as they offer a number of tax benefits and other conveniences. For example, trusts allow families to avoid probate court and structure unique provisions to fit their specific needs and circumstances.
One reason why many families explore the use of trusts is to set aside money for their children. Under federal tax laws, a parent may give an annual gift to their children of up to $13,000 without the child having to pay any gift taxes. This exemption applies as long as the minor has immediate access to the gift. This generally means that any gift held for future use does not qualify for the tax exemption, however.
Reducing the tax burden
Fortunately, due to an exemption in the law, gifts to minors in the form of a trust qualify for this tax break, even if a child cannot access the trust until he or she is 21 years old. Parents may begin making annual $14,000 contributions to the trust as soon as a child is born, and these contributions will never be taxed as gifts. This is an excellent way to provide for a child, maintain control over the assets until the child is old enough to responsibly manage the funds and avoid unnecessary tax liability.
Setting up a trust for a minor could be a wise move for your family. For more information and to get started with the process, work with the experienced Florida estate planning lawyers at BaumannKangas Estate Law.