Let’s face it. we all have to die one day. Maybe today, maybe tomorrow, or many years later. Death is uncertain and not in our hands. What’s in our hands is protecting our wealth after we are gone. We will be talking about creating a trust today.
When reviewing your finances, one of the most frequently asked questions is “Why would I need to set up a trust?” Trust is mostly used to decrease a person’s estate taxes, but it’s also used to pass on assets to a third-party. There are many benefits to be had with setting up a trust.
Read on to learn a few reasons why you should set up a trust.
It Allows You to Protect Your Assets
Setting up a trust does is far more than simply cutting down taxes. It keeps everything you have safe from those who would make things difficult like creditors and people who aim to coerce your beneficiaries.
However, there is something you need to know. There is something known as a fraudulent conveyance, which is a way of trying to avoid debt by giving money to another person.
Some people tend to take advantage of trust solely for this reason. Before setting up your trust, make sure you speak to a lawyer first.
It Gives You Privacy
Although it’s not a pleasant thing to talk about, once a person dies, their will ends up becoming a public document, which is then probated.
Besides, the value of the person’s assets is also made public, giving the government free reign of them.
With a trust set up, grantors and beneficiaries alike won’t have to deal with the government. This is because the trust agreement is a private document compared to a will.
You Have Control of How Things Are Distributed
In some cases, maybe there isn’t enough trust established between you and your beneficiaries. On the other hand, maybe they’re too young to make financial decisions and need financial guidance.
Regardless, as the grantor of the trust, you have complete control over how things are distributed.
In addition to the wishes left by the owner of the trust, it’s up to you to how and when funds are dispersed. Do you want to give everything at once or do you want to have your beneficiaries acquire your assets as time goes on?
Since is bound to impact the beneficiaries’ lives, it’s important to weigh all of the options before making a final decision.
A Trust Helps You Better Manage Your Assets
When it comes to managing your assets, it’s only natural to trust no one but yourself with the responsibility. However, when setting up a trust, you need to look to beneficiaries you know you can trust with your assets.
Granted, there are some cases where they simply don’t want the responsibility, they’re too young or have a crippling medical condition.
So, as an alternative, you can use a trustee to help manage your assets.
You Won’t Have to Worry About Taxes as Much
As we’ve mentioned before, trust can help you cut back on taxes. However, there’s more to it than meets the eye.
For instance, a grantor can divide their income with beneficiaries that have a lower one. By allocating the income of lower-income beneficiaries, you’ll be charged lower tax rates.
However, keep in mind that there may be a few exceptions to this, so be sure to contact a living trust attorney to get everything sorted out.
It’s important that your beneficiaries also know the proper way to file taxes for the money they receive.
Any Benefits of Disability Are Preserved
If any of your potential beneficiaries are qualified for a disability plan, there may be a chance that their benefits will disappear if they are to receive money.
However, by wording your trust agreement right, any assets promised will be held onto for the beneficiary as they continue to fit the qualifications of your province. This form of trust is often referred to as a Henson Trust.
As you can see, setting up a trust not only benefits you, it will benefit everyone included in it.
However, despite these advantages, setting up a trust can be a complex process. You might need to enlist the services of a lawyer to make sure everything goes smoothly.