Financial trusts date back generations; originally, trusts were designed to protect property and ensure it would be passed down to heirs based on the owner’s wants, without the concern of interference by the government after death.

Today, the trust is a useful financial planning tool utilized by investors and individuals alike. Trusts also help protect estates from going through probate and the related expenses.

If you have specific wishes for your estate once you have passed away, then trusts are the way to go. Trusts can be set up in almost any way you wish to ensure your estate is distributed exactly how you want. The following are some things you will need to know if you are considering trusts as a part of your estate.


Do You Need a Trust?

If you are an investor or have a significant amount of wealth, then you should definitely consider one or more trusts.

You may choose for funds to be spent in certain ways by your beneficiaries. This includes things like a college education, business startup expenses, or buying a home. A trust is also helpful in lowering the estate taxes your family would be responsible for after you pass away.

Some trusts will shelter your assets from tax liability — to a point. This is great if you have very high net worth. A trust will also help protect your estate if legal issues come up or the estate is sought out by creditors.

Those who generate a lot of income via passive income streams should consider investing in trusts. In most circumstances, passive income will continue to be generated even after your death. A trust will ensure that any money generated from those income streams will continue and be paid to those you designate.


Which Trusts Should You Consider?

Trusts are a very flexible financial tool, but they can also be very complex. You will need to discuss the pros and cons of each type of trust with your estate attorney when making your decision to find out how well they will fit in with your own financial circumstances.

One type of trust is a revocable trust. This type of trust will let you have total control of the assets within. You can make changes or revoke the trust at any time you wish.

Another kind of trust is an irrevocable trust, which holds your assets and cannot be changed without the consent of the beneficiary. Many people consider this trust advantageous because the appreciated assets are not subject to estate taxes.

In addition, a credit shelter trust, also known as a bypass or family trust, includes writing a will that bequeaths a certain amount to the trust that does not exceed the estate tax exemption. The rest is then passed to a spouse tax-free. Once the money is placed in a credit shelter trust, it remains free of estate tax despite its growth.

A Qualified Terminable Interest Property (QTIP) trust is best for blended families. You can set the trust up so that certain family members receive your assets at a later date while your surviving spouse receives a set income from your estate. This is ideal if you are concerned the surviving spouse would only give assets to their birth children after your death, leaving your birth children with nothing from your estate.

Making sure that your estate is distributed the way you wish is not only important for your own peace of mind, but also to your family’s peace of mind as well. Once everything is set up, there is little they will have to do. If you have questions about trusts, then please contact Thomas, Adams & Associates, P.C.

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