This article discusses setting up a stakeholder child trust fund, best child trust fund account. Trusts are, of course, used in a number of ways. Some of their chief purposes:
To remove property from the grantor's gross estate.
To reduce income taxes during years of greatest productivity (and highest income tax brackets) without depriving the grantor of the benefit of the property after retirement, or in later years when income might be lower.
To save property taxes on many forms of tangible or intangible property transferred to the trust.
To save custodial, insurance, management, and conservation expenses on property transferred to the trust. See family trust for more information.

To protect an inexperienced beneficiary from his own lack of financial sophistication.
To make money available for the use of dependents without having the principal subject to the dependent's creditors (the so-called "spendthrift" trust). State laws vary as to whether such trusts will be recognized. And they cannot protect the beneficiary against claims made by the federal government for unpaid taxes.
To provide periodic income for a charitable organization after the grantor's death, in line with his previous customary donations.
To continue operating the grantor's business after his death, something the executor might be unwilling or unqualified to do. The trustees might include certain key employees, the firm's accountant, and other knowledgeable persons.
To set up funds for the lifetime support of a dependent. Property might be placed in an irrevocable trust for the benefit of aged dependents, handicapped children, ete., and thus escape being thrown into the gross estate.

To set aside funds for purposes that might not be met unless specific arrangements were made. One woman set up a $10,000 trust fund in her will to provide $100 a month for the care and feeding of her cat.
To establish how designated trustees will function and how beneficiaries will respond with a modest fraction of the money and property that will ultimately be transferred-if problems arise, the grantor has time to make other arrangements.

To Setting Up a Stakeholder Child Trust Fund, Best Child Trust Fund Account- Top

A sprinkling trust is a trust established for your children or grandchildren that is flexible enough to "sprinkle" funds out to them in proportion to their varying needs. Flexibility of distribution of funds is the primary motivation behind a sprinkling trust, whereas primary motivation for other types of trusts may be avoidance of litigation, tax minimization, efficient management of funds, or reduction of administrative costs and court costs or a number of other reasons.

There are two common methods for structuring a sprinkling trust. They are known as the fixed share and single fund methods. Although each has advantages and disadvantages, keep in mind the system you might use to provide for your children's needs if you were paying for them directly out of your wallet at the present time.
Fixed share: Under this method each child covered by the sprinkling trust is allotted a fixed share of the principal. The child's needs are then paid for by sprinklings from his own individual share of the income and principal of the trust. When the trust reaches its termination, the child receives whatever is left of his allotment.

Single fund: The single fund approach provides that all the principal and income from the trust be kept in a single fund and that sprinklings be taken from the fund as needed to meet the different needs of the children. Therefore, if one child falls ill and another decides to go to graduate school, the extra expenses for each child are met by the whole of the trust fund instead of just by the children's individual share. When the single trust fund is terminated, the remaining assets are distributed (usually) evenly among the children. Generally, the single fund method for a sprinkling trust is considered to be most flexible in meeting the needs of the children.

You wish to provide for your son for his lifetime, but you want him to be the actual beneficiary. If you have reason to suspect that he will run up huge debts or otherwise waste his inheritance, you can set up a spendthrift trust for an heir. Courts have held that the grantor of property to a trust has the right to protect the beneficiary against his own voluntary improvidence or financial misfortune. The property which is to produce the beneficiary's income is never his; therefore, neither he nor his creditors can squander it.

How it works: A trust is set up and furnished with income-producing assets. The trustee, a bank or other independent fiduciary, is given discretion as to when, under what circumstances, and in what amounts to payout the income. Provision may be made that if the trustee isn't satisfied that the beneficiary will be using the money for what the trust agreement and correlative instructions have defined as normal living expenses and pleasures, no money will be paid out at that time. If the trust instrument provides that income is to be paid out for support, the heir may go to court to argue that he is not getting enough to meet that test, especially if he is still of the age where his parents are legally obliged to support him. If the arrangement was created by will and the parents are dead, their obligation of support is nebulous, and in any case, most spendthrift trusts are created for persons of legal age.

When a spendthrift trust won't work:
Counsel should check the state law to determine whether spendthrift trusts will be recognized in that jurisdiction in the face of creditors' claims. Some states regard spendthrift trusts as a fraud against the creditors. Usually a gambling debt is not regarded as a valid and enforceable claim under state law.

Source: Consumer Information Center

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