How do you set up a trust fund for a child in Florida?

Setting up a trust fund for a child in Florida involves seven key steps: defining the trust's purpose, choosing the right type of trust, selecting a trustee, drafting the trust agreement, funding the trust with assets, addressing tax considerations, and reviewing the trust regularly. An experienced Florida estate planning attorney can guide you through each step to ensure the trust is legally valid and aligned with your goals.

What type of trust is best for a child?

The best trust type depends on your goals. A revocable living trust offers flexibility and lets you maintain control while you are alive, making it a popular choice for parents who want to provide for minor children while retaining the ability to make changes. If asset protection or estate tax reduction is the priority, an irrevocable trust may be more appropriate. For a child with disabilities, a special needs trust is essential to preserve government benefit eligibility.

At what age can a child access a trust fund?

There is no fixed age required by law. The trust document itself specifies when and how the child can access the funds. Many parents choose ages between 18 and 30, often structuring distributions in stages, such as a portion at age 21, another at 25, and the remainder at 30, to prevent mismanagement of a large inheritance received all at once.

Does a trust for a child avoid probate in Florida?

Yes. One of the primary advantages of a trust is that assets held within it pass directly to the beneficiary without going through the Florida probate process. This saves time, reduces costs, and keeps the transfer private. Any assets left outside the trust at your death may still be subject to probate, which is why proper funding of the trust during your lifetime is critical.

Do I need an attorney to set up a trust fund for a child in Florida?

While it is technically possible to create a trust without an attorney, doing so carries significant risk. A poorly drafted trust can be invalid under Florida law, fail to achieve its intended tax benefits, or conflict with other estate planning documents. Working with a board-certified Florida estate planning attorney ensures the trust is properly drafted, funded, and coordinated with your overall estate plan.

How to Set Up a Trust Fund for a Child

CALL US NOW

GET CONSULTATION

November 6, 2023

Trusts are legal entities that contain property or assets on behalf of someone else. They are also very useful legal structures that help families avoid taxation on their assets and ensure they are passed down to beneficiaries when they reach a certain age.

There are also different types of trust that you can set up for asset protection and inheritance purposes.

Probably one of the most important reasons to create a trust for your child is to avoid probate when they need to access assets after your passing. Trusts also allow kids to avoid mismanagement of funds thanks to the trustees tasked with ensuring the trust remains viable until the child needs it.

A skilled estate planning attorney can help you to develop a plan for the trust and its management. So, how do you set up a trust for a child in Florida?

How to Create a Trust for a Child in Florida Step by Step

It might be a daunting prospect to create a trust fund for your children, but the hardest thing for most parents is that they don't know where to start or what the steps in the process are.

To help you get started, here's how to create a trust for a child in Florida:

Step 1: Purpose and Goals of Your Trust

Why are you planning to set up a trust? The trust's purpose is a crucial consideration because it shapes everything that comes after it. Its primary goal is to provide a structured mechanism for managing assets and ensuring they are used exclusively for the child's benefit, whether for education, healthcare, or overall financial security. It shields assets from potential threats, minimizes tax liabilities, and facilitates seamless wealth transfer. A trust also often allows your children to avoid a costly and time-consuming probate process.

Additionally, it allows for tailored provisions to meet your child's needs. Depending on which of these benefits you prioritize, the choice of the type of trust should reflect that. It is also worth reviewing our estate planning basics guide to understand how a trust fits within a broader estate plan before moving forward.

Step 2: Choose the Trust Type

Selecting the right type of trust is a pivotal decision when establishing a trust fund for a child. There are several options for trust types in Florida.

Each type comes with distinct features and legal implications. Understanding these options is crucial in tailoring your trust to suit your child's needs.

● Revocable Living Trust: A revocable trust allows the grantor to maintain control and ownership of assets while specifying how they should be managed and distributed upon their passing. It's flexible, enabling modifications or revocation as circumstances change. However, it may not offer the same level of asset protection as an irrevocable trust.

● Irrevocable Trust: Irrevocable trusts transfer assets from the grantor's ownership, providing greater protection against creditors and legal claims. An irrevocable trust cannot be modified. While the grantor relinquishes control, this type is often favored for long-term asset preservation and estate tax reduction.

● Special Needs Trust: If your child has special needs, a special needs trust is essential. It allows you to provide for their well-being without jeopardizing government assistance. This trust is tailored to address the unique financial requirements of individuals with disabilities.

The type of trust you choose will determine how your assets are managed and will depend on the child's circumstances. Depending on your goals for your child's financial future, you will choose a particular trust in line with those needs.

Step 3: Choosing Trustees for Your Fund

Trustees are responsible individuals who will manage the trust until your child is old enough to claim it. When selecting a trustee, it's essential to choose someone reliable, ethical, and capable of making sound financial decisions. Look for individuals with financial expertise or consider professional trustees.

It is equally important to name a successor trustee, someone who steps in if your primary trustee is unable or unwilling to continue serving. Many parents name a trusted family member as the primary trustee and a corporate or professional trustee as the successor, combining personal familiarity with institutional reliability. Your attorney can help you think through the best structure for your family's specific situation.

It's also vital to ensure the trustee aligns with your values and your child's best interests. Open communication and trust between the grantor and trustee are key for successful trust administration. You might already have some people in mind to be your child's trustees. If so, talk it over with them and with your estate planning attorney. It's also worth understanding how a power of attorney interacts with your revocable trust, especially if a trustee becomes incapacitated.

Step 4: Drafting the Agreement

The trust agreement is a legal document outlining the terms, conditions, and provisions. With the guidance of an experienced attorney, the agreement specifies how trust assets will be managed, distributed, and used for the child's benefit. Understanding what estate planning documents are involved in a complete plan can help you prepare for this step and ensure nothing is overlooked.

It includes details about the trustee's powers and responsibilities, the grantor's intentions, and any specific conditions for asset distribution. A well-crafted agreement ensures the trust operates per the grantor's wishes and the child's best interests.

Step 5: Fund the Trust

Funding a trust requires you to transfer assets to the trust. This doesn't have to be done all at once but can be set up to take place over time. It's crucial to transfer assets accurately, such as cash, real estate, or investments, and update the relevant ownership documentation. Any assets not transferred into the trust during your lifetime may still be subject to probate. A pour-over will can act as a safety net by directing those remaining assets into the trust upon your passing, though the cleaner approach is to fund the trust fully while you are alive.

Common assets placed into a child's trust include bank accounts, investment accounts, real estate, life insurance proceeds, and business interests. If you intend for the trust to receive life insurance proceeds, you will need to update the beneficiary designation on your policy to name the trust rather than the child directly, since minors cannot legally receive large sums outright. Your estate planning attorney can walk you through each asset class and the correct method of transfer.

Proper funding ensures the trust has the resources necessary to fulfill its intended purpose, whether it's education, healthcare, or overall financial security, and safeguards the beneficiary's future.

Step 6: Address Tax Considerations

Consult with a tax professional to optimize the trust's tax efficiency, minimize potential tax liabilities, and ensure compliance with state and federal tax laws. This step can lead to substantial savings and enhance the long-term financial benefit for the child. If you also have a last will and testament in place, your attorney can help coordinate it with the trust so that all documents work together and there are no gaps in your plan.

One tax consideration that is particularly relevant for children's trusts is the so-called kiddie tax, which applies to unearned income above a certain threshold for minors and young adults. The trust's structure and the timing of distributions can affect how this income is taxed, so working with both an attorney and a tax professional during setup is strongly recommended.

Proper tax planning is essential for effectively managing and preserving trust assets. Once you've done the work necessary to address the tax considerations, you can move to maintaining and reviewing the trust.

Step 7: Maintain and Review the Trust

Reviewing your trust over time is often a good idea. Regularly reviewing the trust's provisions ensures they align with changing circumstances and the beneficiary's evolving needs. Our estate planning checklist can be a useful reference for staying on top of all the documents and designations that may need to be updated after major life events.

Specific events that should prompt a trust review include the birth of another child or grandchild, a divorce, a significant change in your financial situation, the death or incapacity of a named trustee, and changes in Florida or federal law that affect trusts and estates. Treating the trust as a living document rather than a one-time task is one of the most valuable things you can do to protect your family's financial future.

Open lines of communication with the trustee are vital for monitoring the trust's progress and making necessary adjustments. This step ensures that the trust continues to fulfill its intended purpose and provides the child with the best possible financial support over time.

Choose Someone to Help You Set Up Your Child's Trust

The trust documents you sign, including the estate plan and the agreement, should be reviewed by a professional to ensure they conform to Florida's laws. Understanding how trust and estate administration works after you are gone is just as important as setting the trust up correctly in the first place.

Elder Needs Law offers Florida estate planning, probate, and Medicaid planning. With years of experience under our belt, we're the perfect choice to help you set up your trust for children. Contact us today if you want to create a trust fund and secure the future of your children and grandchildren.

‍

Jason Neufeld is a Board-Certified Elder Law Attorney and the Managing Partner of Elder Needs Law, PLLC, a Florida Medicaid Planning, Estate Planning, Special Needs Planning, Probate and Elder Law Firm.

Jason is an award-winning Elder Law attorney and leader among Medicaid Planning and Estate Planning attorneys (he is on the Board of Directors for the Academy of Florida Elder Law Attorneys and Co-Chairs the Broward County Bar Association Elder Law Section). The firm serves the entire State of Florida remotely or at any of our physical locations. Interested in additional free or low-cost information. Check out Jason's Book or free educational videos