Setting up a trust can be an excellent way to safeguard your assets for your heirs and family members. It is a part of estate planning that helps streamline your assets’ distribution after your death.
While most people usually create a will, establishing a family trust can be another viable option. It offers a range of unique benefits such as:
- Legal protection for assets from creditors
- Provides tax benefits
- Incapacity protection
- Avoids publicly disclosing trust assets
- Prevent delays in asset transfer
- Helps avoid the potential probate for assets
If you want to know whether a trust might be the ideal option as per your family’s situation, It is best to consult with a financial advisor. However, first, you should gather some information about what is a family trust and how it works.
What is a family trust?
A family trust is a type of living trust you can create as part of your estate plan. It is used to assign the distribution of your assets to your heirs and other beneficiaries, including your sons, daughters, spouses, grandparents, cousins, and other family members.
It involves three key parties: the grantor (who creates the trust with his/her assets); the trustee (financial advisor or estate planning lawyer who manages the trust); and the beneficiaries (those who receive the benefits from the trust).
Types of Trust you can choose from –
Depending on your needs, you can opt for Revocable Trusts or Irrevocable Trusts.
Revocable trust
A revocable trust is a type of trust where you can update the list of assets on the go as you acquire assets. It allows greater flexibility when it comes to changing the terms and conditions of the trust after it has already been signed.
As a result, you can add/remove a beneficiary, reassign the assets for distribution, add/remove assets from the trust, and more. In this case, the terms can be modified as long as you are alive.
However, when you pass away, it can no longer be revoked to make any changes. The assets will be distributed as per the most recently updated guidelines in the trust.
Irrevocable Trust
An irrevocable family trust protects your assets from creditors, helps in minimizing estate taxes, and ensures your wealth is distributed securely according to the terms of the trust.
Unlike a revocable trust, the terms of an irrevocable trust cannot be changed or modified after the documents have been signed. As a result, if you change your mind later, it is challenging to make any changes as you will need to get approval from the court.
Additionally, all beneficiaries should agree to make the changes. Thus, these are more restrictive and mainly used when the grantor has high-value assets they want to protect and exclude from the estate taxes.
Revocable and irrevocable trusts have further subcategories with different benefits and terms to fit your specific needs. Thus, it is best to consult with a financial advisor to explore your options.
How to set up a trust?
When you have decided to set up a trust for your family, you need to consult with a financial advisor. The experienced financial advisors will explain the process as well as handle all the paperwork required for setting up the trust.
The process involves the following phases:
Phase 1: Trust Agreement
First, you need a trust agreement outlining the asset distribution plan while adhering to the legal estate planning guidelines. Thus, it is best to hire professional financial advisory services such as Ruggiero Investments to assist you throughout the process.
Phase 2: Transferring Assets
In the next phase, you need to fund the trust by transferring your assets such as real estate, title documents of your valuable personal belongings, stocks, bonds, and other personal properties. It usually takes a few days to complete the process and set up your family trust.
Why hire a financial advisor?
Whether you choose to opt for a revocable trust or an irrevocable trust, it is beneficial to hire professional financial advisory services. With an experienced financial advisor on your side, you can take optimum advantage of estate planning laws set by federal and state governments.
Moreover, financial advisors are well-versed in the legal requirements for setting up a trust. They will help you explore your trust options and select the one that best suits your particular financial needs.
So, if you need help setting up your own family trust and securing your high-value assets, you should consider consulting with a reputed wealth management firm such as Ruggiero Investments. We provide a range of financial services ranging from managing portfolios, to IRAs, Trust funds financial advisory and more.
If you have any queries, get in touch with our professionals today!
