The Family Trust: What You Must Know

Orange City Iowa Estate Planning

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A trust can be used to manage estate taxes, shelter assets from creditors and pass on wealth to future generations. A family trust is a specific type of trust that families can use to create a financial legacy for years to come. There are several benefits to creating one, although not every family necessarily needs one. If you’re curious about where this type of trust might fit into your family’s estate plan, here’s what you need to know.

A family trust is a trust you create to directly benefit your family members financially, explains Yahoo Finance’s recent article.

The three parties involved in a trust arrangement are the grantor, the trustee and the beneficiaries. The grantor is the person who creates the trust and transfers their assets into it. The trustee manages the assets in the trust for the beneficiaries. The beneficiaries get some type of financial benefit from the trust. With this type of trust, just your family members benefit.

This type of living trust, meaning it takes effect during your lifetime, can be revocable or irrevocable. A revocable trust can be changed or terminated at any time, but an irrevocable trust is permanent. With a revocable family trust, you can be your own trustee, and name successor trustees to take control in the event you become incapacitated or pass away. If it’s an irrevocable trust, you must designate another person to act as the trustee.

A family trust makes certain that your property is managed according to your instructions for your beneficiaries. You can add a condition that a child can’t use the money until they complete college or reach a certain age. You might also create this type of trust if you have a child who needs specialized medical care.

A family trust can also be useful in estate planning if you want to avoid probate. Transferring the title of assets to a family trust means that they’re no longer subject to probate. You can also use an irrevocable family trust to protect assets from creditors if you’re sued.

 

There are several types of trust options you can use in estate planning. Some of these trusts have extremely specific purposes, while others are more general. Speak with an experienced estate planning attorney to make certain that this type of trust is right for you.  Even if this trust is not right for you, don’t fret.  There are many different options that can be utilized depending on your specific circumstances.

Reference: Yahoo Finance (March 17, 2020) “What Is a Family Trust and How Do You Set One Up?”

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