A trust is a legal agreement between three parties – the trust-maker, the trustee, and the beneficiary. The trust-maker is the individual that creates the agreement, the beneficiary is the person that will receive the benefits of the property from the trust-maker, and, finally, the trustee is the individual that is responsible for managing the property for the benefit of the beneficiary. There are many different types of trusts, with various purposes, such as insurance trusts, family trusts, purpose trusts, charitable remainder trusts, and irrevocable life insurance trusts.
Why you should set up a trust:
- To see where your money goes – One of the great things about a trust is that you will actually get to see where your money goes and how it is spent. Most people write a will to pass down their money, which loved ones will collect once they have passed away. But, why not have the pleasure of seeing the benefit your money will have on your family members while you are alive?
- To do what you want with your assets – You have greater control over your assets and how they are spent with a trust. For instance, if you want to set up a trust to fund your grandchild’s education, you can design the trust so that money is released in accordance with their college or university payments.
- To pass down more than just money – The vast majority of trusts contain cash and investments, but you don’t need to be limited to this. You can opt to put virtually anything in a trust. A lot of people set up a trust for their properties. By doing this, you can determine how your property is going to be used instead of leaving your loved ones to battle it out amongst themselves. You can even leave instructions regarding how maintenance and taxes will be covered, as well as who gets to use the property and when.
- To keep your wealth a secret – Not everyone wants their wealth to become common knowledge when they pass away. However, anyone has the ability to find out what assets you had and who received what. If you would prefer to keep information like this private, a trust is ideal.
- To make the most of tax exemptions – Finally, you will be able to reduce estate taxes considerably by setting up a trust. This is a tax on your right to transfer your property once you have passed away. You can place your property into a trust instead to ensure that it is not subject to such taxes. There are other tax exemptions available too, as you may be able to access principal residence exemption and lifetime capital gains exemption.
If you are interested in setting up a trust, you should seek professional assistance. Living trust lawyers can help to ensure that your trust is put together correctly so you do not experience any issues later down the line.
Hopefully, you now have a better understanding regarding what a trust is and how it could benefit you, so you can make the decision as to whether you need one or not.