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5 Benefits of Setting up a Trust Fund You Need to Know About

A trust fund is a legal entity which acts as a caretaker (and perhaps investor) for funds which have been left (by the grantor) to be passed down to somebody else (the beneficiary). A trust fund works because the funds are left in the control of one person, a trustee. This is somebody who the grantor would trust implicitly to make the right decision.

There can be conditions placed on the trust fund and how it can be used. For example, some funds can be used to invest in an attempt to increase how much the fund is worth. Sometimes the trustee may also be entitled to some funds for their role as a fund manager. Other times none of this is permitted, and the funds are simply held until the beneficiary can take control.

If you want to know more about trust funds, head over to www.annarborprobate.com. In the meantime, here are 5 benefits of a trust fund.

 

1.Protection

 

The most popular reason to use a trust is to protect the cash you leave behind. Firstly, there are situations where family members disagree on who should inherit what. With trust in place, this is avoided (for possessions awarded to the trust, that is). There can be no dispute from family members about ownership.

Likewise, having a clear structure in place for a trust allows you to avoid any potential fees that can be added on after you pass away. These fees are for dealing with tax costs and can be applied in multiple states.

Anything gave to a trust also no longer counts as part of your estate, so if any legal action is attempted against your estate, the value of the trust can’t be touched. This also counts for any fees or debts that are being claimed against your estate.

 

2.Less Taxes

 

Trusts can be structured in specific ways to avoid taxes. This area of the law can be complex and requires a good understanding of tax law and what tax-free allowances are available to beneficiaries each year. By understanding this information, it’s possible to give tax-free sums annually to your beneficiaries.

 

3.Investment Potential

 

Remember trust is in the control of a trustee. You can allow this person to invest with the funds, creating a profit and potentially growing the size of the trust over time. This is a popular way of ensuring your trust survives long term, with many big trusts allocating a large percentage for regular investment. There are laws which govern how a trust must be handled when investing, so you often have legal protection against trustees making poor decisions.

 

4.Operational Flexibility

 

Because trust is controlled by trustees, and not just your instructions, it can be flexible in how it operates. Beneficiaries can be given a little more or less cash, depending on their needs, while investment strategies can change on the fly.

 

5.Legacy

 

Leaving behind a trust can be a great way to create a legacy. It’s as though you’re still providing for family members, or donating to charities. Your wealth can be protected and grown over time, potentially lasting through generations of your descendants.

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