Once you become a parent, you have to start thinking about your children’s needs and how you can provide for them. New parents sometimes decide to change where they live, move into a more lucrative or less time-consuming profession, or even change their financial habits in order to provide more stability for their growing family.

While it can be unpleasant to do so, parents also need to consider what will happen to their children if they die. Naming a guardian in a last will is an important step toward protecting minor children when you aren’t able to protect them anymore. You also need to think about their financial needs and how losing you will impact what resources they have available in the future.

For some parents, creating a trust as part of their estate plan can be a way to ensure that assets they want to leave behind for minor children will still be available when those children come of age. If you don’t have substantial assets with which to fund the trust immediately, it may be possible to use life insurance proceeds as a means to fund a trust that will provide for your children.

Make sure your life insurance amount is adequate to fund a trust

Some people purchase only enough life insurance to cover funeral costs, while others may aim for several years of their anticipated salary. Somewhere in the middle is probably the best option for families trying to balance a budget but also protect their children.

It is possible to use the potential payout from a life insurance policy as the funding for a trust that will benefit your children. Placing those funds in a trust will mean that you will have control over how people use the funds.

You can limit withdrawals or prevent them entirely until your kids are 18

If you have a generous life insurance policy or other assets that you intend to use as part of the funding for the trust, you may choose to include provisions that allow the guardian of your children to use some of those assets to cover the cost of your funeral and the cost of living expenses for your children. Private school, medical expenses and college tuition are all examples of costs that you may approve.

For others, leaving behind some resources for a guardian is sufficient, and they choose instead to structure the trust in such a way that no one can access those life insurance proceeds until their children turn 18. Exploring your family situation in depth will give you a better idea of what kind of strategy will work best when funding a trust with your life insurance policy.