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’s (or grandchild’s) future can best be expressed with a gift of security, resources and a foundation of love – the establishment of a wealth creation trust.

When a new child is welcomed into the family or a child turns 13 , 16, graduates from college or has another milestone event, it is not uncommon for grandparents or other family members to want to give that child a monetary gift.

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

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

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

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

But, there is a far better way, which is good for your family members who want to make gifts, good for you as the parents of your child, good for your child, and great for the world.

Establish a Wealth Creation Trust for your child (or grandchild) as a birthday (or birth) gift and let everyone in your family know that all 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, 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 investments for the Trust (my recommendation is first and foremost self-care, well-being programs and entrepreneurial training for the child, and then one or more entrepreneurial ventures 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 up to $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, grandchildren and beyond while encouraging and educating them to create more wealth in the world (rather than squandering what you’ve worked so hard to create), contact my office for a Family Wealth Planning Session.