Let’s get this out of the way up front: Trusts aren’t just for wealthy people.
Let’s take Ryan and Stephanie as an example.
Ryan and Stephanie are a married couple in their 30s with two kids. They work hard and are building a good life for their family. But, like most people their age, they don’t have a great deal of assets—a home that still has a mortgage, savings, and a retirement fund. So, why would they need a trust fund for their kids?
Like many people their age, their biggest asset is their life insurance policy. Ryan is Stephanie’s beneficiary and Stephanie is Ryan’s beneficiary. The kids are the beneficiaries for both if something happens to both of them at the same time.
Now, in the worst case scenario, Ryan and Stephanie both pass away, leaving the life insurance policy to both kids. What happens to that money? Who takes care of it? What instructions are left behind for anyone to follow?
That’s where a trust comes in.
A trust will establish a trustee to care for the children financially in the same way that a guardian cares for them physically, spiritually, and emotionally. Plus, the parents determine when and how the trust is accessed.
Ryan and Stephanie determined that the trust should pay for basic living expenses and for college. After that, each child receives a portion of the trust when he/she turns 25, 30, and 35. That way the kids grow into the trust.
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