A trust fund often involves wealthy families or well-off individuals looking to share their money and wealth with their legal heirs. However, the fact of the matter is there are various reasons and benefits for creating a trust fund, even if you aren’t rich. Making a trust fund for your family is a challenging feat to achieve, especially if it’s your first time. So, before going through the process of setting one up, consider what a trust fund is, how it operates, and how it will preserve your wealth and protect your assets.
The individual creating the trust is referred to as the grantor. On the other hand, those receiving the assets are the beneficiary. The grantor designates a trustee to ensure their assets are distributed according to their wishes. A will lists down what you wish for your assets after your passing. On the other hand, a trust fund ensures that your wealth is distributed to the rightful heirs. Let us look at a few things you should know while creating a trust fund for your family.
- Select The Correct Trust Type
Before creating a trust fund, you must consider its purpose. For instance, there are living trusts, testamentary trusts, irrevocable and revocable trusts. Some types are listed below.
- Charity Trust: This trust will allow grantors to give gifts to charitable organizations.
- Special-Needs Trust: This trust will ensure that whatever is left in the well is passed to those with needs.
- Education Trust: This trust specifies that funds from the trust must only be utilized to pay for educational expenditures.
- Spendthrift Trust: This fund limits how heirs can utilize their funds and how they’re distributed.
So, figure out your purpose for setting up a trust fund, and select wisely.
- Share Details With Your Trust
As mentioned before, you have to look at four aspects before setting up a trust. They are:
- Trustee: the individual who carries out the grantor’s wishes.
- Grantor: the individuals who set up the trust fund.
- Beneficiary: the individual(s) who will get the trust’s contents.
- Property and assets: the trust’s contents that the beneficiaries will receive.
After choosing the right one, you must decide how the trust fund’s assets will be managed, what assets or cash you’ll deposit, the trustees and beneficiaries will be. Furthermore, don’t forget to consider the time period your trust will be active for and under what conditions
- Make Things Official
Numerous websites and self-help pages provide cost-effective trust services. However, these typically aren’t safe options. Setting a trust fund can be a complex thing. Therefore, most grantors will consider hiring a trust attorney or a reputable estate. So, ask your colleagues and friends for recommendations if you’re comfortable doing so. However, if you’re thinking about hiring an advisor, they will also steer you and guide you to ensure you make the correct decisions. The local and state bar also have a list of lawyers who know the latest federal and state trust fund laws. In the end, consider comparing prices and testimonials before putting pen to paper with an attorney.
Your lawyer will help you create a trust instrument, trust declaration, or trust deed to make things official. These can be simple or complex. But that will be decided by the trust fund type you go for, the number of beneficiaries, and the assets in it. Once your lawyer has filled the trust document, you will have to give your signature in the notary’s presence to make things official.
- Funnel Money Into Your Trust
Once your trust fund is up and running, it’s now time to add funds to it. Therefore, the next step is to grab your legal documents and take them to a financial institution such as a bank to create a trust fund bank account. First, your bank will ask you for the details of the trust fund nominees, such as their contact information. Once you’ve opened a trust fund account, you can deposit money overtime or the entire amount into the trust in one go.
- Don’t Forget To Register It With The Internal Revenue Service (IRS)
After opening a trust fund bank account, you need to register it with the IRS for tax reasons. Every trust fund type will typically have its own TIN for financial statements and tax returns. Such a requirement is the same as an individual’s SSN (Social Security Number) or EIN (Employer Identification Number). So, visit the IRS’s website and register your trust fund online by submitting Form SS4.
Creating a solid estate plan is often vital for ensuring your family is taken care of when you’ve left this world. While a trust fund can certainly be one part of your plan, it should include funeral plans, a power of attorney, a will, etc. In the end, arrange these things before it’s too late. Doing so will allow your family can feel comfortable about the future.