Do you avoid looking into trusts because you think they are only for large families or the wealthy? Many people don’t give trusts due consideration because they think they are for certain groups of people. To dismiss them, however, could be a mistake. You may miss an opportunity to accumulate and protect assets for your own financial wellbeing and for the benefit of your loved ones. We hope this brief article sheds light on whether further inquiry into trusts might be beneficial for you.
Without planning ahead, especially by utilizing the benefits that come exclusively from creating a trust, your family could face some harsh financial realities after you are gone. They will have to pay federal and state taxes on your assets. This could dilute your legacy more than you realize or intend. Your assets will also become open to public scrutiny through the probate process.
Trusts can alleviate both these concerns.
Unlike Wills, trusts do not go through probate, a public legal process that typically takes time and costs money (e.g., legal fees). With a trust, your private financial matters stay private, and your assets go directly where you provided.
A trust involves a grantor (you), a trustee and beneficiaries. As grantor, you determine the provisions of the trust. You also provide the assets and name your beneficiaries. Beneficiaries don’t have to be family members. You can name individuals or groups, such as church, charities or colleges, as beneficiaries.
A critical step in the process is determining who will carry out your wishes. This person serves as trustee and manages the assets in the interests of your beneficiaries. It can be a relative or friend, but many people have a professional trustee act as either sole or co-Trustee with a family member.
After death, the trust distributes your assets according to your wishes. For example, the trust could distribute your assets immediately at your death to your beneficiaries. Alternatively, the trust could continue to invest and monitor your assets until your spouse dies or until your children reach a certain age, or they could remain in the trust for future generations. Another option involves distribution of just the income generated by trust investments.
A Trust can also provide asset management, estate planning consultation and tax services, like investment oversight, financial reporting, asset disbursements and bill payment. If you are your family’s CFO, these services may be of great value to your family when you die.
Is a Trust Right for You?
If you want the lion’s share of your legacy to pass to your loved ones and not the government, then you may want to consider establishing a trust. You should also consider a trust if you know how you want your legacy managed, preserved, and distributed.