It’s a common misconception that trust funds are exclusively for the rich. Trust funds can be a very useful tool for anyone who wishes to pass along assets to a future generation. While it may be daunting for many parents to consider a time when they will no longer be there for their children, that time will come. When it does, a trust fund is a really good way to ensure your assets are passed along the way you would wish, with minimal interference. Despite their reputation for impenetrability, trusts can be set up without much trouble. Below are a handful of steps that will put you on the path to a productive trust fund.
Find A Trustee
The first task in creating a trust fund is to find a person who will be the trustee. This trustee will actually oversee the assets in the trust until they pass to your children. You can fill this post yourself, but it’s important to name a trustee to take over in case of your death. This choice should be made carefully. A bad trustee might end up making financial decisions that endanger the fund itself. Ideally, they will be someone with money management skills who understands money, investments and value. If your fund permits, they can even be a hired expert. The most important thing about picking a trustee, as the name implies, is that you trust them.
Hire A Lawyer
The paperwork involved in setting up a trust is complicated, exact, and changes from state to state. You can’t risk getting it wrong, hire a lawyer to do it. According James Arenson of Cedar Rapids trust attorneys, “The law concerning trusts and estate planning can be complex and involve other aspects of the law of which you may not even be aware. There are a variety of different trusts, and knowing which one would be best for your unique situation is difficult without having a deep understanding of the law.” In particular, make sure you hire an estate-planning lawyer. On top of that, check to make sure they have a good reputation. This is where most of the fees associated with a trust fund come from, legal fees. However, if the paperwork is handled wrong in any way the trust won’t work the way you mean it to. It may even become a burden for your children instead. This is one of those situations where a lawyer is essential.
As you create the trust with the lawyer, you’ll be asked how you want your assets to go to be released. Here, it is best to be as specific as possible. For example, if you know your son has trouble saving it makes no sense giving him the lump sum of the trust on his 21st birthday. In the trust, you can specify that the trust gives him regular small amounts instead. If you want funds set aside for specific things, such as college or a car, that’s possible to. In fact, the only conditions you can’t put on are ones that violate public policy. You can’t encourage them to break the law for trust dollars or penalize them for marrying into another race. You know what is best for your kids, make sure even here that you help them be their best selves.
Now that the trust is built, you have to put assets into it. Assets in a trust can be anything of value you own. It can be different types of property, stocks, even lump cash. The trust will then take over those assets and look after them until your kids take possession. Be careful you don’t put in assets you might want back. Once assets enter the trust, they no longer belong to you, they belong to the trust. While the trustee has some authority to manage these assets as a custodian, for the most part they’ll stay undisturbed in the trust till your kids get them.
LimitYour Tax Obligation
After funding the trust, it’s now time to sit back and let the trust do its work. The major thing you’ll no longer have to do with a trust is pay taxes on the assets in the trust. Since they no longer belong to you, you aren’t taxed if their value goes up. One of the benefits of a trust is also that your children will avoid a lot of the estate and inheritance taxes that would crop up if you just left these assets to them in a will. In its own way, a trust fund provides peace of mind for the future.
A trust fund can be a great legacy, not just for your children, but their children too. You worked hard to provide for your family. A trust will ensure that that hard work will keep paying off long after you’re gone. The attorneys at Giles & Robinson, P.A. have the experience to assist with you all your probate legalities. The steps above will see to it that your assets will pass safety to the next generation. More than that, you can make sure they use that money on things you know they’ll need. While this life may be limited, a trust fund will preserve your memory now and in the future.