Did you know that less than 2% of the population in the United States receive a trust fund? Some people don’t think to begin a trust fund because they don’t know where to start. Luckily, different types of trust can benefit someone for their individual needs.
Read on to learn about trust basics and which type of trust is right for you.
A trust is a separate entity holding assets or property for the future. The heirs of the trust receive the assets or money. A trust fund will provide funds or income for the beneficiaries chosen by the grantor.
There are common types of trusts, but it is important to keep in mind that a trust is sometimes more than one type.
All trust funds will fall into a revocable or irrevocable category. A revocable type of trust fund means it can get changed or revoked. This is a more flexible option for those who want to move assets in and out.
In conjunction with wills, a revocable trust fund can be used to pass high-value property down. This could be something like a house that can get quickly passed to the beneficiary.
A revocable living trust fund gets made during the lifetime of the grantor. Any trust fund that is not testamentary is living. This means an irrevocable type of trust can also be a living trust fund.
These types of trusts cannot get modified once they are made. However, there are narrow circumstances where you can modify them.
When the trust is left as is, the benefits are better. For example, the trustees receive asset protection from creditors and tax reductions.
Most special types of trusts for estate planning are irrevocable trusts. These complex trusts are used for those with larger estates.
After you die, a testamentary trust is created with instructions from a will. Once the will goes through probate, the assets are transferred to the beneficiaries.
This type of trust fund is irrevocable because the grantor is unable to change it. This is an effective way to make arranging a trust fund cost-effective. It saves money because it does not need to get maintained while the grantor is alive.
Wealthy married couples use bypass trust funds as a planning strategy to help minimize taxes on their estate. This is basically two trusts in one.
When one spouse died, the A trust holds assets for the spouse who is still alive. The B trust will then help minimize estate taxes.
Which Type of Trust Is Right for You?
If you have an estate that you want to ensure falls into the hands of the right people, a trust fund may be the route to go. However, setting up a trust fund is not always an easy process because of the many options out there. By using this guide, you can understand which type of trust is right for you.
Keep coming back for articles on a variety of topics!