You may have heard terms like "Trust Fund Baby" or read about people putting properties and money into trusts.
And you may think a trust is just for the ultra-wealthy, jet-setting crowd.
But the reality is that trusts can be useful for everyone, and these unique financial tools can help you and your loved ones reach their goals in the future. Here are a few things to know about trusts and how they work!
Of course, if you have questions or want assistance setting up a trust, come talk to us! Our qualified financial advisors can help you decide what type of trust is right for your and your family. We’re here for you, for life!
1. A trust fund is a private contract that is always accessible to the holder.
The process of probate turns private wills into public documents. That means they’re a matter of public record that anyone can look into. A trust, on the other hand, is a private document that never sees a courtroom. No one, other than the trustee and the designees, can see a copy of the trust contract. This can help to prevent any disagreements down the line by your heirs or loved ones about your estate after you pass away. Trust funds also offer accessibility. The assets placed in a trust can be accessed according to the terms set by the grantor.
2. Your designated trustee is responsible for executing your wishes upon your passing.
When you establish a trust, you appoint a trustee to manage and distribute the assets according to your wishes. This person or institution is legally obligated to follow the instructions as outlined in the trust agreement. Upon your passing, the trustee steps in to ensure assets are distributed to your beneficiaries as you intended. This can provide peace of mind, knowing that your loved ones will be taken care of in the way you envisioned.
3. Trust funds can lower taxes.
Life insurance benefits are usually included in your estate. This payment can push an estate over the threshold for federal income tax. Irrevocable trust funds, on the other hand, can help reduce or eliminate estate taxes owed after the trust fund holder dies. Trust accounts can also spread the capital gains from an estate among several parties, lowering the total taxes paid on the proceeds of the sale of a house or other significant assets.
4. Trust funds allow for greater control.
A trust fund offers greater flexibility and control when compared to a will. While a will simply dictates who receives your assets after you pass away, a trust allows you to set specific terms and conditions for how and when those assets are distributed. For example, you can stipulate that a beneficiary receives their funds upon reaching a specific milestone, such as graduating from college. This allows you to continue to be a part of your family for years into the future.
5. Trust funds do not require an attorney or witness.
While it’s always advisable to consult with a legal professional when setting up a trust fund, it’s not a legal requirement to have an attorney or witnesses present. Trusts can be established by simply creating a trust agreement, which outlines the terms and conditions of the trust, and transferring assets into the trust.
Whether you’re 30 years from retirement or 5 years from retirement, we have one other thing that might help. Sign up for our free webinar, Estate Planning: The Principles of Preserving Wealth with CommonWealth One Financial Network Advisor Denise Rich.
