Did you know that 55% of Americans are more concerned about being able to afford retirement than they were a year ago?
The past year and a half have been hard for many people, personally and financially. It’s hard to predict when the next global disaster might befall us.
If you want to protect your descendants from potential financial ruin in the future, a funded trust could be a good option for storing your wealth.
But what is a funded trust, and is it different from other types of trusts? How does it work, and why should you choose a funded trust for your assets?
Keep reading to learn what a funded trust is what you need to know about how it works.
What is a Trust?
A trust, by definition, is a secure fund in which to place assets of some kind. Trusts can include both property and financial assets.
A settlor and their legal team create a trust. The trust includes specific rules as to how its assets can be accessed and used. Until the beneficiary is able to access the funds in the trust, a group of trustees safeguards the trust.
How Does a Trust Work?
Trusts are designed to preserve assets more securely than simply transferring ownership of the assets to another individual. Because the stipulations of use are created under the guidance of a trust lawyer, there are very few reasons why the assets wouldn’t be disbursed according to the settlor’s wishes.
Trusts exist for a variety of reasons. People often use them for estate planning. Others use trusts to be able to gift funds to their spouses or children without having to pay estate taxes on the funds.
Sometimes, people simply want their assets to be kept and distributed in a secure and private way. There are various kinds of trusts for all these reasons and various ways of setting up and maintaining these trusts.
Why Choose a Funded Trust?
The most common type of trust that people think of is the “trust fund,” but unfunded trusts also exist. An unfunded trust is basically a written agreement of which assets the trust will contain, but the trust doesn’t actually hold those assets yet. This leaves the trust and the beneficiary open to financial risk.
A funded trust, on the other hand, contains all the assets and has the necessary paperwork in place to transfer ownership of the assets to the beneficiary upon fulfillment of the trust’s stipulations. This is the more secure type of trust for you and your beneficiary.
A funded trust is also desirable in that it can provide financial support to a beneficiary over an extended period of time (such as a living stipend or allowance).
Set Up a Funded Trust Today
Now you know the answer to the question, “What’s a trust?” Use this knowledge to set up a funded trust and support the financial wellness of your beneficiaries for years to come.
Looking for more information on financial wellness? Take a look at the other articles in our Business and Finance sections!