Trust Are For Rich People 

Do You Know What A Trust Is? It’s ok if you don’t, this blog post is here to give you more information.  Trusts are written agreements designed to protect your assets from creditors, family members (inheritance) and spouses, and other parties that may want a piece of your assets. There is a misconception that trusts are for rich people, but trusts are not designed for a specific group.  Trusts are designed to protect assets and many people are misinformed about how they actually work. Trust agreements can be used for various purposes to achieve your goals.

• For example: Married parents that have a home together, the best thing to do is transfer the home from an individual to a trust after the 1st parent dies.  
• A child cannot make any claims or decisions after the 2nd parent dies.  Selling or refinancing the home will be at the discretion of the trustee(s).

Six Types of Trust

Each trust falls into six categories.  These are: living trust (while both the grantor and beneficiary are alive); testamentary trust (created under a will of the grantor – becomes effective upon grantor’s death); revocable trust can be changed or terminated by the grantor during their lifetime (living trust); an irrevocable trust, cannot be changed once its established (living and testamentary); funded trust are trust that has assets put into during the grantor’s life time (living, testamentary; revocable; irrevocable); unfunded trusts are usually funded after the grantor death (living; revocable; irrevocable).

Protect Your Assets

Trusts are very useful to create when a person is expected to inherit a large sum of money or assets. It ensures the assets will be well spent and controlled. The individual has no voice or control of how the trust is operated.  The trustee(s) (appointed by the grantor) has full control of the assets. The beneficiary is entitled to receive bank statements showing the current standing, notifications of the status and request withdrawals from the trust.  It will be at the trustee(s) discretion to honor or deny the request.  Although the trustees can act independently, the beneficiary has the right to question and object to how the trustee is being controlled.  Only the grantor has the power and authority to change the trustee(s).

Generational Wealth

Setting up a trust is beneficial especially for blended families and minors.  It ensures protection of assets and has the benefit of appointing responsible people to make monetary decisions for the beneficiaries whether there are minors or not.  A case where a female passed away and left assets and cash to her daughter (who wasn’t minor) outright; within a year of her passing, all the assets and cash were depleted. Friends and other family members took advantage of her.  If her mom had put a trust in place while she was alive or created under her will, there would still be assets for her and generations to come. Trusts can create generational wealth.

It’s Not That Complicated

Trusts sound complicated but it’s relatively simple. Once you convey your wants and wishes, the applicable trust can be established.  A simple discussion today can avoid issues in the future.

Author: Miriam B.