How Can I Start a Tax-Free Trust Fund?
You can protect your estate and start a tax-free trust fund for your children to provide for them when you are gone. The payouts can be one lump sum or staggered over many years; you can set it up however you wish. To set one up, you need to have life insurance in place first to fund the trust fund after you die.
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Instructions
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Obtain life insurance in any type and amount that suits your finances and lifestyle. If you are married, ask your spouse to do the same.
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Contact an attorney and set up an irrevocable life insurance trust linked to your life insurance and your spouse's life insurance policy, if applicable. You can name anyone you want as your beneficiaries.
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Contact your beneficiaries to let them know about the irrevocable life insurance trust. When you die, the money from your life insurance policy will go directly into the irrevocable life insurance trust and stay out of your taxable estate. The money can be used by your beneficiaries for whatever purpose you specify, if any.
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Tips & Warnings
If you are trying to establish a tax-free trust fund for a child, you should check with your financial adviser about setting up a 529 college savings plan or custodial account as a way to protect your money and pass it on to the child when the child reaches 18 or another specified age.
References
Resources
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