What is a minor’s trust?
A minor’s trust manages and protects assets for a child until they reach a particular age. Some minor’s trusts provide funds to a child during their childhood. Others don’t provide any funds until the child becomes an adult. The goal of the trust is to hold and protect funds until the child is old enough to make their own decisions.
Some deeds for a minor’s trust state that funds can only be used for specific reasons. The reasons can include education and medical expenses. Medical expenses might be particularly important where a child has a disability or illness.
Why create a minor’s trust?
There are a number of reasons you might create a trust for a child, including:
- when a child inherits assets from an estate and the will says that their inheritance must be held in trust until they reach a particular age
- a family member has set aside funds for the child, such as an education fund
- the child is paid compensation for the death of a relative
- the child is paid superannuation benefits from a family member who has died
- an insurance company or the courts agree that compensation money should be paid to a child for an injury or for a civil or criminal act.
Who can be a beneficiary of a minor’s trust?
Any child who is under 18 years can be the beneficiary of a minor’s trust.
Who can be a trustee?
Parents, siblings or friends of the beneficiary who are over 18 years of age and Australian residents can be a trustee. You can also choose a professional trustee company, such as State Trustees, or a legal, accounting or financial planning organisation.
When compensation is involved, the court will decide who should be the trustee.
Often, trustees work with the beneficiary’s parent or guardian on matters that relate to the trust until the beneficiary is 18 years of age.
How long can the trust run?
The length of the trust depends on the instructions in the trust deed. However, most trusts end when the child reaches a particular age. This is usually 18, 21 or 25 years of age.
The trust may also end when a particular event happens or a milestone is reached, such as finishing tertiary education.
What can the trust funds be used for?
All funds from the trust must benefit the child. When funds are requested, the trustee should think about:
- how much is in the trust and how long the funds need to last
- the needs of any other beneficiaries
- any specific rules in the trust deed about what the funds can be used for.
Funds are often used for:
- educational expenses
- medical expenses
- recreational activities.
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