A trust fund is set up to protect and distribute your assets to the people, or causes, you cherish. You can set the time frame for a trust fund to distribute your assets, either at some time before or after your death or even at a designated age for the recipients.
Considerable thought is important to whom or what organization the trust is designed to benefit. For example, if the trust is designed to benefit your grandchildren and the amount of your wealth is great, you may want the trust to distribute the grandchildren’s wealth when they are at a more financially savvy age, like 30 years or older. You may even want the money to be used only for certain circumstances, such as paying for college or a new house.
Kinds of Trust Funds
There are a number of different kinds of trust funds you can set up. Some trusts may skip a generation, such as one set up for grandchildren. Other trust funds may act as tax shelters or protect certain assets. The two most common types of trusts are living trusts and testamentary trusts.
A living trust is set up during a person’s lifetime and a testamentary trust begins after a person’s death; once their will goes into effect. Living trusts are set up into two different categories: revocable and irrevocable. A person can continue to change or revoke the assets in a revocable trust; of course every time you do this there is a fee. An irrevocable trust is managed by a trustee and becomes its own entity. As its own entity, you are no longer obligated to pay income taxes on those assets and with the proper planning those assets may be exempt from estate or gift taxes.
Benefits of Trust Funds
Trusts are very important accounts that allow easy distribution of your assets and help to minimize the impact of estate or gift taxes. It is important to use an estate attorney to set up your trust. They will help you navigate the challenging state and federal laws that surround the distribution of assets. This will ensure the protection of your assets and make sure your trust is legally sound.
You can place stock, cash, real estate, or any other valuable assets in your trust. The cost of setting up a trust runs between $1,500 and $3,000. If your trust is set up to run and distribute your assets well past your death it will incur fees that will be deducted from the trust. The costs of setting up a trust fund are minimal compared to the expenses an estate can incur when the process of probate distributes wealth.
