WHAT IS A TRUST FUND?
A trust fund is defined as an independent legal entity that holds assets and property for its beneficiaries. They can be used in estate planning to hold money, investments, businesses, property, and more. There are three people required to form a trust fund: a grantor, a beneficiary, and a trustee. The grantor is the person who creates the trust and puts desired assets into it. The trustee is responsible for managing the assets in the trust, and they can be an individual (like a lawyer) or an organization (like a bank). The beneficiary the individual or organization that receives benefits from the trust. Beneficiaries don’t legally own all the assets in the trust but instead are allowed benefits from the trust as decided by the grantor. The grantor can also specify how the beneficiary must use the assets provided. For example, a father might make a trust fund for his child but only let them access the money for college funds.
WHAT ARE THE BENEFITS OF TRUST FUNDS?
There are many different reasons why people choose to utilize trust funds. Some of the main benefits of trusts are:
- You can protect your beneficiaries – Many parents choose to create trust funds when they want to ensure that their children don’t spend the money irresponsibly. The trustee can manage the children’s assets to make sure the assets are used how the grantor intended. Trust funds can also be created for minors for them to access once they reach a certain age.
- You can protect your assets – Securing your assets in a trust fund also ensures that no one else gets your assets except for your beneficiaries. Even if a beneficiary gets divorced, the beneficiary’s spouse normally can’t get any of the trust assets in the divorce settlement.
- You can reduce the estate tax – After someone dies, a federal estate tax is placed on their assets, but this doesn’t include assets in a trust fund. By minimizing the size of your estate with a trust, you can also substantially reduce any estate tax due after your death
- You can avoid probate – Probate is a time-consuming process in which your assets are distributed to your beneficiaries by a probate court. Assets in a trust fund don’t need to be distributed in a probate process.
If you’re looking to create a trust fund, Herting Law PLLC is here to help you with all of your estate planning needs! Contact us today for quality legal counseling.