Trusts Aren’t for Rich People
When I try to convince my family and friends that they should consider setting up a Trust Fund for their children, I always get the same reaction.
That reaction is a puzzled look followed by, “What the heck are you talking about? I ain’t rich!”
Most people are under the impression that a Trust is only needed if you have great wealth, but I realize the reason they’ve fallen under that belief is because they do not realize what a Trust is, or what the purpose is behind the creation of a Trust.
What is a Trust?
Very simply, a Trust is created when you give something to Person A (usually money), so that Person B can use it. Person A, who manages and protects the thing given, is called the Trustee, and Person B, who gets the benefit of the thing given, is called the Beneficiary.
I got my son a piggy bank, (he calls it his “money pig”), and I occasionally put loose change into it. With every dime I drop in, he tells me of all the things he’s going to buy, but I remind him that all of this money is for college. The money pig is a Trustee, and my son is a Beneficiary.
When you create a Trust, you get to set the conditions on which the Trustee can give the benefits to the Beneficiary. Just as above, I set the conditions so that my son only gets the benefits if he is using it for education.
Why Should I Create a Trust?
Most often, Trusts are created in a Will so any money that is passed on to heirs will have some management. You wouldn’t give a teenager a big pile of cash and just tell them to spend it wisely would you? Setting conditions on your terms creates security even when you’re gone.
A very common Trust scheme is the HEMS Trust, which allows the Trustee to provide benefits to the Beneficiary for Health, Education, Maintenance, and Support. When the Beneficiary has to justify the expenses, it prevents them from blowing it all on a fancy car or letting them put it all in their bank account where creditors can come after it.
What if I Don’t Have a Lot of Money?
You don’t have to have a lot of money to want to protect your future heirs. Also, consider that just because you don’t have much money now, doesn’t mean that you won’t have a lot of money when you pass away.
When you pass away, there could be a life insurance policy, retirement account, or your estate could receive a large settlement if you pass away in an accident at someone else’s hands.
The point is, setting up a Trust doesn’t take a lot of time or money and provides many benefits and protections for your loved ones when you’re no longer here to look after them.
--Authored by Matthew L. Harris, Esq.,
Matthew Harris Law - Estate Management Division
1001 Main Street, Suite 806, Lubbock, Texas, 79401-3322,
(806) 702-4852
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