There are many reasons especially when you are getting a little older to set up a family trust. You do not have to be rich and you do not even have to have a lot of assets; but why not protect those assets you do have? The trust is set up to help protect property and eliminate tax liability during the process of transferring assets to other family members.
The trust can be set up when a person is alive or to take place upon the event of their demise. The people involved in setting up a trust include the settlors, the trustees, and the beneficiaries. The settlor sets the trust up and is responsible for keeping the assets that will later transfer to the trust. Once assets are in place, the trustees are responsible for managing the trust under the terms and conditions set forth in the trust deed. This is the legal document that spells out the criteria for dispersing assets.
Why use a trust? There are many reasons.
- Perhaps you have children or grandchildren that you do not want to have control of any of your assets until they are of a certain age.
- Perhaps you are ill with a terminal disease and you want to make sure if anything happens to you that your family will be taken care of.
- You might want to establish a trust for your children’s education or to pay for assisted living for your parents.
The list goes on. These are a variety of trusts available:
• Revocable Trust – A revocable trust is created while the Settlor or Trust maker is still alive. It can be altered, changed, modified or revoked at any time. This type of trust is also referred to as a Living Trust.
• Irrevocable Trust – This trust, as the name implies, allows no alteration, changes, modification or revocation after its creation. No one including the Trust Maker can remove property from the trust.
• Asset Protection Trust – The sole purpose of this trust is insulate assets from future creditors. Although most of the time these types of trusts are set up off shore you do not have to transfer the assets outside the country.
• Charitable Trust – This type of trust is set up to benefit particular charities usually for estate planning purposes to lower estate and gift taxes.
• Special Needs Trust – This is a trust set up for a person who receives government benefits so the recipient does not end up disqualified from receiving those benefits.
Many people avoid writing a will or setting up a trust. If you have a family and assets that need protection, why wait? Consult with your attorney, financial advisor or tax preparer for advise on what time of Trust to set up. It is highly recommended to prepare a Family Trust sooner than later.
By Jerry Mohr for the 50 Plus Report