^Blog The Power of a Child’s Trust in Estate Planning

When it comes to estate planning, ensuring that your children’s inheritance is protected is a crucial consideration. Many parents assume that leaving assets to their children at predetermined ages, such as 25, 30, or 35, is the best approach. However, this traditional method can expose inherited wealth to risks such as lawsuits, divorces, and unintended beneficiaries. A child’s trust offers an alternative that provides long-term security, control, and flexibility for your family’s financial future.

The Risks of Traditional Inheritance Structures

In a standard estate plan, assets left to children are often held in trust only until they reach a certain age, at which point they gain full ownership. While this may seem reasonable, it creates potential vulnerabilities. If your child is sued, those assets become accessible to creditors. If they go through a divorce and have commingled their inheritance with family assets, part of their inheritance could be subject to division. Additionally, if they pass away, their spouse may inherit the assets rather than your grandchildren or other intended beneficiaries.

These risks can lead to significant wealth erosion over time, particularly for high-net-worth families looking to preserve assets across multiple generations.

How a Child’s Trust Protects Wealth

A child’s trust is an estate planning tool that ensures your assets remain protected while still benefiting your children. Unlike traditional inheritance structures, a child’s trust does not require an automatic distribution at a certain age. Instead, the assets are held in trust for your child’s lifetime, offering built-in safeguards against lawsuits, divorce settlements, and mismanagement.

Your child can be appointed as a co-trustee at a specified age, such as 25, and later become the sole trustee, managing the assets for their own benefit. However, because the assets remain within the trust, they are not exposed to legal claims or unintended beneficiaries. On your child’s passing, the assets can be directed to their children (your grandchildren) or another designated family member, ensuring that your wealth stays within the family line.

For high-net-worth families, a child’s trust is a powerful way to preserve and protect generational wealth. To explore how this strategy can strengthen your estate plan, visit Three60Wealth.ca and schedule a complimentary consultation.

Secure your family’s legacy with thoughtful estate planning.

Authored by: Jason Nagel, at Three60 Wealth