You don’t have to be a millionaire to create a fund, even those with low incomes are eligible to do it. Trust funds can provide the legal protection that your family needs. Many people don’t realize how useful trusts are–in managing property and assets, distributing them. It can relieve you of many burdens.
Trust vs. Will
A trust is a legal document established by an individual or corporation. It becomes active on the day it is created and can distribute assets before its creator has died. The trustee (a person responsible for the possession of trust) ensures the asset stays in their possession until the beneficiary (who the trust is for) is ready to receive it.
On the other hand, a will becomes effective only after its creator has died. It dictates who should oversee their children or inherit their assets. Also, it must go through probate court for public record. In other words, wills are less private compared to trusts, which can remain concealed unless needed.
Which is better?
Both are legal documents and important in their own aspect. One doesn’t trump the other. For some, setting up a trust is an excellent way to save and protect their assets. While some go for wills as they are easy to set up and can be less costly. Many companies now even help clients with customized wills online, at much affordable rates, and with less hassle.
Nevertheless, the reasons to establish trust far outweigh any inconveniences. To learn more about the benefits of setting up a trust fund, read on.
1- It saves you the hassle of probate
When setting up a trust, the money goes directly into your beneficiaries’ accounts, saving you the trouble of going through the courts. If you’re worried about the government getting involved in your affairs, you might want to consider setting up a revocable living trust, which will allow you to retain control of your assets even after your death.
2- It helps with children’s College Fees
A trust can help pay for higher education costs, especially if you have children attending college soon. Colleges often charge high tuition fees, so the money your children receive from a trust can make a big difference. And, you won’t need to worry about the student loans piling up when they graduate because they’ll already be taken care of.
3- Establish Charitable Trusts
If you have a good heart, you can set up a trust fund for charitable organizations, such as hospitals or home care centers. Those who cannot afford to fend for themselves can benefit greatly from your generosity. An advantage of setting up a charitable trust is that you can use the asset or property while you’re alive, and it will be distributed in the name of charity after your passing.
Establishing trust for other people can ensure that you aren’t just giving away money but helping others, making a huge difference in the lives of those who need it.
4- Reduce liability on Estate Taxes
If you’re in a higher tax bracket, you might want to consider setting up a trust. Taxes won’t be due on the properties that are subjected to trust, as it goes to your beneficiaries as a “gift.” Additionally, each beneficiary can receive a limitless amount. In other words, if you have a large estate, you can pass it on to several people, reducing your taxable income.
5- Separate property and assets
Since trusts are mostly made and distributed in the life of the grantor, they are easy to divide among the beneficiaries without squabbling and cheating. The detailed paperwork spells out all the reasons clearly as to why the person is inheriting (in the life or after the demise) of the grantor.
Living trusts are beneficial in this situation as they have more control over the wish, allowing the beneficiaries to receive equal or righty deserved amounts, preventing family squabbles over the possessions.
6- Gives you control over its privacy
If you want, you can set up a trust that only allows certain people to see the details. Since trusts don’t have to go through probate, you can keep them from accessing your trust records. You can also hide information from certain relatives, like parents or spouses, by restricting access to your trust documents.
The purpose of a trust is to ensure your beneficiaries receive what you have granted them without having to run back and forth to the court. It’s important to choose a trusted attorney who will help you draft a proper trust. The best way to do this is to create a document that outlines exactly how your money should be distributed. Once your trust is complete, you can rest easy knowing your beneficiaries will be able to take care of themselves after you die.