Hold for minors - A child can't inherit until he or she has reached legal age, so a child's inheritance must be held in trust until then. But it's also possible to hold a child's share past the age of majority if you feel that age is too young to handle money.
Protect from children's spouses - A parent who will be leaving quite a bit of money to a young person might want to hold the money in a trust to a certain age, to avoid having the money vest in the young person and be available to an unscrupulous spouse.
Protect from spendthrifts or addicts - Sometimes individuals need help managing their money to make the most of it, due to problems that may or may not be resolved in the future. For example, a child with a drug addiction probably should not be given a large sum of money. The child's parent can help protect the child by setting up a trust that pays the child's rent but not for the habit.
Hold a particular asset - A family asset such as a lake cottage may be held in a trust for a set period of time so that all of the family members can use it. The trust should ideally also hold enough money to pay for taxes, insurance and repairs of the asset.
Control ultimate destination of funds - Putting money in trust for individuals, as opposed to simply giving the money to the same individuals, means that if not all of the funds get used up, you can control where they end up. For example, you could set up a trust leaving money for use by your elderly parents, but if the parents don't use it up, you could direct that any money left over goes back to your estate.
Defer taxes - It might be a smart idea to put certain assets, say the shares of a privately-owned business, into a trust for a spouse so that the capital gains tax that would otherwise arise will not arise until the spouse passes away (or disposes of the shares).
Split income - If a parent is paying significant taxes on financial assets, he or she might want to put some assets into a trust, such as a family trust, so that the tax burden is shared with others in the family, or paid by the trust itself.
Achieve a purpose - Trusts can be set up to fund trusts that are not for an individual person but are intended to meet some purpose. An example would be setting aside some money in your Will for the care of your pets or animals after you pass away.
These are very general descriptions, and of course there are other types of trusts as well, but this list is intended to give you some ideas about how readily trusts can be used to achieve certain estate-planning goals. As a word of caution, please do not try to draft a trust without help from an experienced lawyer, as the wording is absolutely critical.
Hey I my friends I tell you something can you give me answer I When you make gifts to a child in trust, you want to do it in such a way that your gifts qualify for the annual gift tax exclusion. This isn't automatic because your kid can't touch the money until she's an adult. Under the gift tax law, this is viewed as a gift of future interest, which doesn't automatically qualify for the annual gift tax exclusion. But the law allows two types of trusts for minors to qualify for this exclusion. Both types get their names from the provision in the Internal Revenue Code that creates them.
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As the term "Internal Revenue Code" might have already alerted you, this reader is American. Gift tax is American. His point may or may not be valid in the US but has nothing to do with us here in Canada.
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