Setting up a Trust Fund
You have probably met people throughout the course of your life who did not have to work because their parents set up a trust fund in their name. Chances are, you found the entire concept unfair and you were simultaneously jealous.
However trust funds are not only for the wealthy, and if you are looking for a way to take care of your family after you pass away, it might be a good idea to think into setting up a trust fund.There are three people involved in setting up a trust. The first is you, the grantor (also called the Settlor) who sets up the trust fund in someone else’s name. The second is the beneficiary: the person, entity or organisation in whose name the trust fund is created. The third is called a trustee, and is the person who is responsible for managing the trust fund. You can hire a professional attorney of a financial consultant to be the trustee, or you can allow a close friend or family member to do it instead.
As mentioned above, you do not need to be a millionaire to set up a trust fund for family or friends. Many people do it these days and for a variety of reasons which include:
- A method with which to avoid the inconveniences of probate court procedure.
- A way to ensure the proper management of your assets.
- To make sure that family or friends are taken care of.
- To simplify the resolution of estate taxes.
When researching the methods with which to set up a trust fund, you will want to consider two basic forms: testamentary and inter vivos. A testamentary trust fund is an “after death” trust fund which is not available to the beneficiary until the grantor has passed away. An inter vivos trust fund is a “living trust”, which goes into effect while the grantor is still alive.
There are different reasons to use both types of trusts, depending on your personal situation. Most people use living trusts when they want their loves one(s) to have access to their trust fund at a certain time, regardless of whether or not the grantor is still alive. You might need to use a testamentary trust fund, however, if you are simply looking to take care of loved ones after you have passed away.
Forming a Trust
There are multiple reasons for forming a trust, including asset protection, tax planning purposes, protecting family wealth and businesses or other beneficiaries, and even to prepare one’s affairs in the event of death. Forming a trust has also increased in popularity due to factors affecting wealth preservation, such as political instability, marital of family disputes and harsh tax regimes.