Families seeking to give their children or grandchildren money should consider a trust fund, which is an account where someone's assets are held for the benefit of another person. The grantor is the person who starts the trust and has control over who his beneficiaries will be as well as how the assets will be distributed. The beneficiaries are those who will receive the trust's assets. The trustee is the one who will carry out the grantor's wishes.
Advantages of a trust fund
One benefit of a trust fund is that families will avoid the probate process. When a person dies without a will or trust fund, the justice system is responsible for locating relatives of the deceased and distributing assets. Another advantage of trust funds is that families are able to use it to fund their children's college education. With a trust fund families can avoid the estate tax since trust funds.
Disadvantages of trust funds
One disadvantage of a trust fund is the cost of preparation. This is because of the large amount of paperwork that needs to be completed in addition to expensive attorney fees. Sometimes there is no flexibility with a trust depending on whether the trust is irrevocable or revocable. An irrevocable trust means that it cannot be changed while a revocable trust can be changed.
Process of setting up a trust fund
The first step is to meet with a banker to discuss if it will be a living trust or the type that goes into effect after death. The person would then decide on an irrevocable or revocable trust fund. He will need to name the beneficiaries and the trustee of the fund, and also determine which assets will be a part of your trust fund. If the person has property that he wants to give to the beneficiary, he can transfer the property's title to the trust fund.
Trust funds for those with special needs
If the beneficiary has special needs and is receiving disability benefits, the grantor should not give him more than $2000 in assets from the trust because the beneficiary could lose his disability benefits if his assets exceed this amount. However, the beneficiary can have a car or home despite the value without losing his benefits.
Financial stability from trust funds
A person's children will benefit from a trust fund in amazing ways. Beneficiaries may decide to pay for their college education or they might use the assets from the trust to purchase a home. The person can use the trust fund to start a business, which could help enable financial stability over the long run.
Trust funds are not just for the wealthy
Some might think that trust funds are primarily for those who are affluent but this is not always true. Some in the middle-class establish trust funds for various reasons. For example, a person may want to set up a fund to help him should he become disabled and unable to care for himself.
Trust funds are excellent for giving families a better start in life financially.