A trust is a legal agreement that allows one party (the grantor) to give another party (the trustee) the right to hold assets for the benefit of a third party (the beneficiary). Trusts can take various forms and help achieve many goals, depending on the needs and objectives of the grantor. Various types of assets can be held in trust, including (but not limited to) real estate, securities, life insurance, business interests and cash. An attorney formalizes the details in a trust document, which guides the trustee in managing the assets based on the grantor’s wishes.
Questions to Ask
Though they have long been used as estate planning tools for high-net-worth individuals, trusts can also be helpful for families of all sizes and incomes. Answer these questions to see if a trust might be helpful for you.
- Do you have young children? If something were to happen to both parents, a trust and designated trustee can provide the financial framework to protect, manage and grow the family’s estate assets until the children reach maturity.
- Are you caring for someone with special needs? A carefully drafted special-needs trust may provide for them and supplement the assistance provided by federal and state programs, such as Social Security Disability, without putting those entitlements at risk.
- Would business interests be part of your estate? An irrevocable life insurance trust can hold a life insurance policy with a death benefit to provide liquidity for estate taxes, allowing the business to continue operating under the control of a future generation.
- Do you have complex family dynamics? Trusts can offer more control than a will for disbursing assets in the case of divorced individuals, blended families, strained parent/child relationships or other special circumstances.
- Do you anticipate estate tax issues? People with estates larger than the federal estate tax exemption (for the current exemption visit irs.gov) may use a properly structured trust to postpone, reduce or eliminate estate taxes.
- Are you comfortable having your estate details on the public record? A trust keeps your financial information private and permits you to transfer your estate as you intend, while limiting the time, expense and public nature of the probate process.
- Would you want to provide specific support for your spouse, children and grandchildren? A trust allows you to control how your assets are distributed after your death, and provide for successor beneficiaries such as a spouse, children, grandchildren or others you designate.
- Do you want to leave a legacy to charitable causes? Charitable trusts allow you to make donations to charitable causes and receive estate and income tax benefits.
Using a trust offers you many different options both during your lifetime and after your death. A financial advisor can put you in touch
with a range of resources to help you decide the approach that is best for you, including providing guidance on estate planning and choosing a trustee.
with a range of resources to help you decide the approach that is best for you, including providing guidance on estate planning and choosing a trustee.
Source: Forbes.com