Forbes Article on Borrowing From A Trust Fund

Forbes recently wrote an article titled “Is It OK to Borrow From A Child’s Trust Fund?

The article was a response to someone who wrote in asking if it was all right to use money from a fund being held for their 10 year old daughter in trust for until she is 21 years old in order to pay for their house so they don’t get turfed out due to foreclosure proceedings.

The response from Forbes was that it was wrong because the family did not appear to be using sound budgeting principles and that it didn’t seem likely that they would be able to repay their daughter.

However, from a legal point of view:

There is nothing unethical per se about borrowing from the trust in order to provide your family with the basic necessities of life. It’s certainly in Isabel’s best interest to live in a decent home, and presumably shelter is what you’re planning to spend her money on. But in the situation you’ve described, you can’t just use her trust fund to tide you over indefinitely. Borrowing Isabel’s money is ethical only if you have a realistic plan for repaying it. Good intentions don’t count.

I rarely see specific mentions on the legal and moral elements of trust funds in the popular press so I wanted to include it as relevant to someone interested in trust funds for kids.

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