Close Menu

Blog

The Wealth Creation Trust: A Gift That Keeps On Giving

multi-gen-family

The perfect gift for your child or grandchild on the occasion of their birth, Bar or Bat Mitzvah, Sweet 16 or Quinceañera cannot be found in any store. Instead, the hopes and wishes you have for your child (or grandchild’s) future can best be expressed with a gift of security, resources and a foundation of love through the establishment of a Wealth Creation Trust.

When a new child is welcomed into the family or a child celebrates a mileston event like college graduation, it is not uncommon for grandparents or other family members to give that child a monetary gift.

In most cases, that happens through a check written to the parents, or perhaps to the child and put into a custodial account at the bank. There are several problems with this type of gifting:

  1. Often, the parents cash the check, commingle the funds into the family accounts and the child never gets to see the benefit (you’d be surprised about how often this happens);

  2. The money is put into a custodial account, the child accesses the account at 18 (or 21) and uses it to buy a car or fund a backpacking trip; the decision about how to utilize the money is made without thought or foresight for the future, effectively squandered;

  3. The money is used to pay for college, counting against the child for purposes of financial aid, also effectively squandering the money;

  4. The money is used by the child after he or she is married, commingled with the assets of a spouse and lost in a divorce, squandered.

There is a far better way to create a gift of security and a foundation of love.

Establish a Wealth Creation Trust for your child (or grandchild) as a birthday (or birth) gift and then let everyone in your family know that all future gifts for the child should be made out to the Trustee of the [Name of Child] Wealth Creation Trust.

Then, when your child gets to be an age specified in the Trust, he or she can step into the role of Co-Trustee of the Trust, learning how to operate the trust and best utilize the funds in the Trust. He or she will be trained on the best types of investment for the Trust (our recommendation is first and foremost self-care, well-being programs and entrepreneurial training for the child and then one or more entrepreneurial ventures that the child is involved in, which have the possibility of doing a lot of good in the world and earning a healthy return on investment in the form of appreciation and purposeful, aligned work by the child).

Your child will learn the purpose of the Trust (to encourage the creation of wealth from one generation to the next, rather than the squandering or wasting of assets); how to protect it (keep the investments in the name of the Trust, regardless of how funds are used, so always title investments properly and sign on behalf of the Trust); and how to create more wealth in the future using the Trust assets.

Now, the gift you created when your child was just born, or achieved a specific life milestone becomes not just a vehicle of financial security, but education and impact for a lifetime and beyond.

Gifts in the amount of $14,000 per year (in 2014) per person can be made into such a Trust for your child without the need to file a gift tax return.

If you would like to learn more about how to establish a Wealth Creation Trust to secure the financial future of your children and grandchildren while encouraging and educating them to create more wealth in the world (rather than squandering what you’ve worked so hard to create), contact our office at (727) 537-6818 or info@kdlawpa.com for a Family Wealth Planning Session.