Trust funds are not only for the super wealthy.
You have heard of trust funds.
Perhaps you envision the Rockefeller family.
Maybe you visualize mansions, diamonds, and summer homes.
According to a recent Business Insider article titled “A trust fund gives you control over your money after you’re gone, and it’s not just for the super rich” you do not need to be a millionaire to have a trust fund.
Trusts do more than shelter assets from estate taxes.
With a trust fund, you can bypass the probate process.
At the same this this helps streamline wealth transfers and charitable giving.
Not all trusts function the same or cost the same to maintain.
Although there are different trusts, all share three parties in common.
The first is the trustmaker, also known as the grantor, settlor, or trustor.
The trustmaker “funds” the trust with assets.
The second party is the trustee.
The trustee can be either a person or institution (or both) and is responsible for managing the trust.
The final party is the beneficiary (or beneficiaries).
This party enjoys the assets based on the terms of the trust.
Trusts can either be revocable or irrevocable.
Commonly, with a revocable living trust, the trustmaker, trustee, and beneficiary are the same person (or persons).
A revocable trust allows the trustmaker to make continue making changes to the trust.
The assets held in the trust can generate income for the trustmaker and are included as part of his or her estate.
This also means the trust is fair game for creditors seeking assets of the trustmaker.
When the grantor dies, the revocable trust becomes irrevocable.
The latest amendments to the trust fund are final.
The second type of trust is the irrevocable trust.
Once created, it cannot be changed with very limited exceptions.
The assets are separate from the estate of the trustmaker.
Generally speaking, taxes on these are not paid by the trustmaker either in life or death, with limited exceptions.
Instead, taxes are paid by the beneficiaries or the trust itself.
The trust fund may even be shielded from creditors, if done properly.
It is important to discuss your needs, goals, and circumstances with the an experienced estate planning attorney.
Reference: Business Insider (December 2, 2019) “A trust fund gives you control over your money after you’re gone, and it’s not just for the super rich”