Trust Administration: Benefits of Setting Up a Trust Fund

April 6, 2014 sarah Family

A trust fund is an important component of your estate plan when you want to give a certain amount of money to your minor kids. It makes sure that your money managed by a trustee, is set aside and made available to them as they reach a certain age. Generally, setting up and managing trusts are complex and time consuming. It can also cost you a significant amount of money, so you ought to have a very good reason to want to set up a trust.

The following are some benefits and purposes for using trust funds:

AVOIDING TAXES:

Irrevocable life insurance trust is one common tax-saving trusts. Upon your death, all proceeds from your life insurance policy is added back into your estate, which often turns an estate that’s not subject to federal taxes into an estate that’s required to write a check to the office of the IRS.

However, an irrevocable life insurance trust safeguards life insurance death benefit revenue from estate taxes. After setting up a trust, you still have life insurance, and the recipient or recipients still get the proceeds from your insurance policy when you die. But for now, estate taxes may not be a problem.

AVOIDING PROBATE:

By keeping any of your properties out of your probate estate, you can avoid many of the issues on lack of privacy, costs, and hassles associated to probate.

PROTECTING YOUR ESTATE (and the estate of the beneficiary or beneficiaries:

One of the main purposes of trust funds is to safeguard your estate even after it becomes part of someone else’s estate.

For instance, you’re planning to leave half a million dollars to your only daughter, but you are very much concerned that before you can say, “marry at the age of 25, she will have spent the money.

In this case, you could use a trust to parcel out the money to him or her as you see fit. The trust fund can give him or her a certain amount each year for a certain span of time; and then a final lump at a certain age when you think he or she will be mature enough to protect it as if he or she had actually earned it herself.

You have the option to add conditions on how the amount in the trust is dispersed, such as your child receives a little portion of the money when he or she graduates from college and gets a good job, for example, or when he or she meets some criteria you’ve established when you set up the trust.

PROVIDING FUNDS FOR EDUCATIONAL PURPOSES:

A trust fund could make money available to the members of your family, relatives, even to non-relatives, such as friends or employees, for educational purposes, like tuition and living expenses.

BENEFITING INSTITUTIONS AND CHARITIES:

You can give money to charitable institutions by setting up some type of charitable trust that may, for instance, yearly give a particular amount of money to the charity organisation while you are still alive and give a larger amount of money upon your death.

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