When most average Americans hear words like “family trusts” they often find their minds wandering to images of wealthy families flying around the world and entertaining celebrities on yachts in the Mediterranean. They seldom think of themselves. That’s a mistake, though, since trusts have come a long way in the last several decades. While they were once the prerogative of only the truly rich, today those estate planning tools are a valuable resource for anyone who wants a better way to manage assets. If you want to provide your family with asset protection and more efficiently manage your financial goals, the family trust can provide many benefits.
What is a Family Trust?
The family trust can take many forms. At its core, however, it is a trust that is in many ways like any other. It involves all the typical components that you find in other trusts:
- The grantor, who establishes the trust and funds it with his or her own assets
- The Trustee, who is responsible for managing the trust assets and protecting them for the benefit of the beneficiaries
- The Beneficiaries, for whose benefit the trust exists
Why Would You Need a Family Trust?
There are many different reasons why you might want to have a family trust, depending on your family circumstances. Family trusts can offer a structured way to pass assets on to your children and grandchildren, ensure that money remains in your family for subsequent generations, and enable you to pass on wealth from your business to your children while realizing certain tax advantages that might otherwise be unavailable.
That latter purpose is one of the most common reasons for creating the family trust. By allowing the trust to have ownership of company assets, you can pass one trust income to your adult children in a way that often takes advantage of their lower income tax brackets. Using this option, you can help to fund your children’s college costs, pay for down payments on houses, and cover needed medical costs or other expenditures. Your beneficiaries can sometimes receive thousands of dollars in benefits each year through this trust vehicle, and enjoy substantial income tax benefits in the process.
Of course, you can also the trust as a business succession tool, gradually transferring ownership of the business to your heirs. Meanwhile, however, you retain control over those assets and can manage them as needed to accomplish your broader financial and estate planning goals.
Benefits for the Average Family
One of the biggest advantages for most average families is that a family trust can help parents to provide funds for their children’s college needs. Even as tuition costs have continued to increase in recent years, many families are struggling to help their children with that expense. And while college loans continue to be the main financing vehicle used by many students, many of them are looking for other options. A well-structured family trust can be that ideal option.
To achieve this goal, many grantors include trust terms that outline how the money is to be used. These terms can specify that the trustee utilize the money for the child’s tuition, to ensure that he or she gets the education needed to secure a lucrative career in the marketplace. At the same time, though, those trust terms can be flexible enough to provide the student and the trustee with the ability to pay for other educational outlets or career choices if the student decides that college is not part of his life goals.
For example, if your student decided that he or she wanted to go to a trade school, then your trustee could be provided with the discretion necessary to make that happen. In like manner, if that student wanted to skip college altogether and simply start his own company, you could provide enough discretion to fund that startup. Obviously, you can customize your own family trust as needed to achieve a variety of different goals.
Standard Benefits Apply
Of course, your trust provides the standard benefits too, including asset protection if you structure everything properly. Take these benefits, for example:
- Like other trusts, your family trust can provide for the distribution of assets when you die.
- If the trust is irrevocable, it can protect assets from estate taxes and other tax liabilities.
- The money in an irrevocable trust can be safe from creditors, litigants, and other threats, as long as you and the beneficiaries cannot access it directly and a spendthrift provision is included.
- The trust can help you to remove certain assets from your estate, lowering its overall value and potentially helping you with Medicaid planning and other strategic goals.
- Your trust can be designed with provisions to ensure that wealth remains in your family – protecting it from the risk of divorce, and making sure that those assets are safeguarded so that they can continue to grow in value over time.
Of course, none of these benefits can be realized without the right kind of help. Trusts are powerful legal tools that can help you to reach your financial and estate planning goals, but they are not something to be taken lightly. And contrary to what some websites might have you believe, they are also not something that should be handled with low-cost forms downloaded from the internet. To get a trust that can do what you need, and ensure that it has been created the right way, you need the assistance of an experienced family trust expert.
The family trust attorneys at the Fouts Law Group, LLC have the experience you need to ensure that your broader business, financial, and estate planning needs are met. We’ll review your current circumstances and anticipated needs and goals to help you create the trusts and plan you need to meet those objectives. Your wealth didn’t arrive by accident; it was the result of years of hard work and enterprising decision-making. You need to work just as hard to protect it with the right family trusts for your needs. To learn more about how trusts can benefit you and your family, contact us online or give us a call at (404) 596-7520
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