Parents and legal guardians are encouraged to set up a child trust account for their children. Why? Such an account is a good long term, and tax-efficient way of investing and saving money for your children. By creating a trust fund account, parents will be at peace and relax that their children will have financial security if something unexpected were to happen to them.



A trust fund is an arrangement which permits an individual to establish long term benefits for his or her children or beneficiary. Aside from cash, a trust fund could also include property, bonds, stocks or any other financial instrument. The main idea of a trust fund is to assure the donor or grantor that his or her loved ones will receive benefits once he or she dies. A trust fund aims to provide sustained financial support to the beneficiary.



A child trust account is a savings account opened by the parents or guardian for their children, who are named beneficiary. A trust account is managed by a third party called custodian or trustee. The custodian is usually a bank or trust company. A custodian or trustee may be appointed by a court. The custodian is responsible for managing the money in the account. Because he or she has the fiduciary duty to handle such account, the trustee may be held responsible if something bad happened to the account. In the past, the trustee does not receive any compensation for managing the trust fund or account. In this modern time, a trustee receives some type of compensation. This compensation could be a fixed amount of money. It could also be a percentage of profit earned by the fund.

Once the minor reaches the legal age, which is usually 18, he or she has the legal right to the account and the parents will no longer have control on the account. Under the Uniform Gifts to Minors Act, parents or guardian may open a savings account for their children. This law allows an adult to contribute to account in the child's name.

Why open child trust account? Some parents are hesitant to open such account. Some believe that such account is for rich people only. Others think that this could be a very risky move. There are many benefits when you open a child trust account for your children.