What exactly is a trust fund?
A trust fund is an independent legal entity that holds property and other assets for the benefit of a third party (called a beneficiary). It can be used for estate planning.
(Looking for “will preparation lawyer“? Contact us Today!)
The person who establishes a trust is called the grantor. They may name one or more beneficiaries, like their children or grandchildren, a business partner, or a charity. They also name a trustee, often a family member or financial institution.
There are several types of trust funds, and each serves a different purpose. The key is to choose the type that best meets your needs.
Using a trust can help ensure your wishes are met and the people you care about receive their inheritance according to your standards.
It can also help you avoid probate.
You can create a trust by either transferring your assets into it while you’re alive or by stipulating in your estate plan that these assets will go into a trust after you die.
A trust is an estate planning tool that allows you to leave a legacy without paying high estate taxes when your assets are of value.
If you have a child with special needs, a trust can help you leave them money for specific purposes. This can include healthcare, educational expenses and medical treatments.
Another reason to set up a trust is to protect your children, especially if they’re minors or have special needs. It’s also a good way to ensure your children aren’t left with more money than they can afford.
The key is to be clear about why you’re setting up a trust and to work with an experienced attorney who can help you create one that fits your unique goals.
Knowing your goals for the trust will guide your decisions about how it’s set up, who you name as beneficiaries and how you’ll distribute the funds once the grantor has died or otherwise terminated.
You can choose to use a revocable or irrevocable trust.
A revocable trust is flexible and can be updated as needed. However, these trusts are still part of the grantor’s estate and can be affected if the grantor is facing legal claims, medical bills or other debts.
There are several types of revocable trusts, including living trusts and transfer-on-death (TOD) trusts.
To set up a trust, you should work with a lawyer to draft the trust and determine how it will be managed. The lawyer will help you determine how the assets are distributed after the grantor’s death, and whether they should be paid out in a lump sum or as an income stream.
The lawyer can also help you decide who you should trust to manage the assets in your trust. You may choose to have a trusted friend or relative manage your trust, or you might choose a financial advisor to help you invest the assets in a way that will best suit your estate planning goals.