Simply put, a trust or trust fund is an efficient way of passing on your assets to family members, loved ones, or as charitable contributions. A trust fund avoids the probate system, meaning less time and stress when you pass on your legacy.
If you’re like most people, you probably think of a “trust fund” as a sizable bank account. It’s something a wealthy individual passes on to a child or grandchild. Right? While it’s true that millionaires and billionaires are more likely to have financial advisers who assist them in establishing trust funds, the fact of the matter is that anyone can (and should!) take advantage of these legal mechanisms. There is no minimum dollar amount required to establish a trust. They simply allow for greater flexibility and specificity in determining how, when, and to whom you distribute your assets.
For example, a will allows you specify which assets you wish to distribute to your beneficiaries, and how. But what if you pass away unexpectedly? What if you leave tens of thousands of dollars’ worth of assets to your six-year-old child? What if the named beneficiary passes away unexpectedly? A will alone cannot account for these kinds of situations.
So How Does a Trust Help?
A trust (and the trustee who will manage your assets on your behalf) acts as an intermediary between your assets and their beneficiaries. You can direct that your trustee freeze any assets left to your children until they turn 18, or graduate from college, or decide to purchase a house. You can specify that your beneficiary may only use the fund for a specific purpose, such as paying for education.
In addition to providing greater control over how your assets are distributed, there are other major benefits of a trust. These include avoiding the probate court process and shielding your assets from estate taxes. Without a trust, the legal system may become a huge headache for your beneficiaries. If somebody contests your will, a judge must step in to help distribute your assets. This can lead to significant delays. Not to mention that the division of your assets is now a public affair.
For many folks, the end of the year is a natural time to take account of one’s finances. Your employers, financial institutions, and any charitable organizations to which you contributed, send you end-of-year statements that illustrate your financial situation. You may already be in the midst of making decisions about the year ahead, such as insurance options, investments, and so on. As you do so, consider taking some time to establish a trust. You’ll enjoy the peace of mind that comes from knowing your assets are safe.
Our office specializes in assisting clients with establishing wills, trust, and overall estate plans. Learn more about how we help establish a trust that keeps your assets safe, and arrange a free consultation today to get started.