Trust funds, also commonly known as deeds of trusts, are great ways of helping protect your family by ensuring that they are well provided for in the future. Generally, trust funds help protect your assets, guarantee income for your beneficiaries and help you avoid certain taxes.
An irrevocable life insurance trust is a type of trust that will help you save on your taxes. If you have a large estate (over $3.5 million as of 2010) your beneficiaries may be subject to estate taxes. Even with smaller estates, inheritance taxes can be charged depending on where you live. If you set up a trust and make the trust the owner of the property, after your death, items in the trust are not subject to estate taxes or inheritance taxes since nothing is inherited--the trust continues to own the property, in the name of whomever you established the trust for.
Protecting Your Estate
One of the major benefits of putting up a trust is the capacity it gives you to protect your properties even after it becomes subjected to another party’s control. For instance, say you wish to leave $700,000 to your only daughter and you are worried that she would spend the money on a shopping spree. You can utilize your trust to control the money as you deem appropriate and only allow your daughter to receive a certain amount per year or for a particular period. You can have the trust make a lump sum or final payment when she reaches a certain age at which you feel that she’ll be responsible enough to handle the money herself.
Providing Educational Funds
Trusts will give you the means to make funds available to your grandchildren, relatives and nonrelatives for educational purposes. You can arrange for trusts that will parcel out funds for your loved ones’ education with a no-study, no-funds rule.
Making Charitable Contributions
You also have the option of setting up a charitable trust that may, depending on the terms, annually donate funds to a certain charity while you’re still living. You can also provide them with bigger amounts or regular payments even after your death. You can arrange for a charitable trust that will allow you to make donations to a charitable institution for a specified duration and then give the principal to other beneficiaries.
- Photo Credit Keith Brofsky/Photodisc/Getty Images
Instructions for Setting Up a Trust Fund
A trust fund is an investment fund that the law considers a separate entity from its investors. It is a legal avenue...
How to Set Up a Trust Vs. a Will
In the area of estate planning, you could use either a will or a trust to determine what happens to your assets...
Advantages & Disadvantages of Charitable Foundations
Creating a charitable foundation is becoming more popular as individuals with large estates want to direct their money to specific causes. Creating...
What Are Advantages of Trust Companies?
Trust companies are a method for protecting assets and investing in personal wealth. Trust companies offer individuals an option for asset protection...
What Are the Benefits of Setting Up a Trust?
There are several types of trust funds available including revocable trusts, which can be modified by the grantor through lawful amendments to...
Advantages of a Living Trust
A living trust has many advantages in the estate planning arena, like potentially avoiding probate. Learn the advantages of a living trust...