Opening a trust account for your children means that you are giving your children security. You are making it possible for your kids to one day be able to pay for their education, a car, their first trip overseas or their first home. A trust account means you are giving your kids a small start – and it can be small or big – in life.
How do you set up a trust account?
It is easy to set up a trust account with the bank. A trust account, not to be confused with a trust fund, is opened in your name, with your child as the beneficiary. The trust account is managed by you until the child turns a certain age, in which case it then becomes their account. The age is usually 18, although you can determine this with the bank. You are the trustee of the child’s account until the child gets ownership. A grandparent can also be the trustee, as can an auntie or uncle, or any guardian.
Is a trust account different to a trust fund?
A trust account and a trust fund are two completely different things. A trust fund is a fund consisting of assets belonging to a trust, held by the trustees for the beneficiaries. The difference between a trust account and a trust fund is that a trust fund is made up of many assets. The trust account is made up of the money that you have put into the account.
A trust fund is a legal arrangement where the person’s assets (cash, shares, houses, cars, antiques) are transferred to a family trust and managed by the trustees on behalf of the beneficiary or beneficiaries. A trust fund usually involves many assets and is often fairly large.
How to open a trust account
You can go to the bank and open a trust account in exactly the same way you would open a savings or check account. You can also do it online. The bank will talk you through the paperwork needed and will tell you how to open the account. You would need your ID and also the ID of your children or beneficiaries, plus all the usual paperwork to be completed, proof of residency and contact details. It is a good idea, if you have children, to open a trust account for them as soon as you can. The account, like any good savings account, will grow in size and interest, and you can have a monthly debit order or put funds into the account whenever you have extra. You are safeguarding your kids’ future.
Are there different kinds of trust accounts?
There are always going to be options for you. You can talk to your bank and find out what works best for you and the amount of money you have to put into the trust account. The trust account you choose could be a high-interest savings account or a fixed term account, i.e. a term deposit account. A term deposit is when you put the money in the account and do not touch it for an agreed term. You get a fixed interest rate with a term deposit account. It all depends on how much money you have and how much you can put in each month, and whether you are going for a low risk or a high-risk investment. Talk to your banker about a trust account and let him guide you through the process.
What documentation do I need to open a trust account?
- Bank application form, completed
- Proof of residency, or citizenship, or temporary residency.
You may also need to provide a tax number, the ID for your children, and of course all your contacts. But each bank will guide you through the process, whether online or in the actual bank itself.
When will my kids get access to their trust account?
The bank will tell you how to open the trust account. When they turn 18, you will hand over control of the account the child. This is an automatic process and at the same time you open the account, the bank will provide you with the details. Sometimes you can hand control over to the child before he or she turns 18, but you need to check with your bank manager or banker.
Should I tell my children about their trust accounts?
As soon as your children are able to understand what a trust account is, it is a good idea to talk to them about it. You don’t want to do it too early, but they do need to know that they will one day be the beneficiary of the trust account. It’s also a good way to teach them to be responsible about money and to encourage them to do the same for their kids one day.
Biljana is a Digital Marketing Manager for BestFind. BestFind is an Australian comparison website for personal and business financial products. We make it our mission and goal to provide the simple, comprehensive and transparent data for financial products from many of Australia’s financial institutions.