5 Things You Should Know About Setting Up A Trust Fund
If you want to transfer your asset, money, or any form of asset to your loved ones, then you have to set up a trust fund. Similar to a will, it is an estate planning tool that provides a clear idea to your family members on how to handle matters once you pass. But trust fund provides more privacy and control by being more specific. It allows you to lower estate taxes and prevent probate, saving your beneficiaries time, money, and paperwork. One of the best ways to set up a trust fund is to get assistance from a financial advisor. It will help you know different technical aspects, so decision-making will be easier for you.
You can include things like cash, jewelry, real estate, cars, and investments in the trust fund. When the grantor of the trust fund passes away, the control of the trust fund will go to your beneficiaries. In some cases, trust funds have some stipulations, such as beneficiaries reaching a certain age. But it is not always the case as the grantor can create the trust as they want to. Without further ado, let’s find out some key things that you should know to set up a trust fund.
Pick the Right Type of Trust
Before setting up a trust fund, you need to assess your needs to pick the right type of trust. Knowing what is a trust fund will also make you aware of different trust funds that serve different purposes. Different trusts are applicable in different cases for families, so you must know about them to make decisions accordingly.
Firstly, an education trust declares that funds can be used to cover academic expenses. In spendthrift trust, it puts certain restrictions on beneficiaries on how they can use the funds and distribute them. On the other hand, if there is someone in your family with a disability, then you can use the special-needs trust to allocate the income or inheritance. Or, if you like giving charity and want to serve charitable organizations, you can choose the charity trust.
Know the Details of Trust
To set up a trust fund, you must know its basic components, including grantor, beneficiary, property and assets, and trustee. The grantor is the person setting up a trust, while the beneficiary is the one who will receive the trust contents.
Property and assets are the contents that you can include in the trust. It could be anything that the grantor owns, eventually going to the beneficiary. The trustee is the person who is a fiduciary for the trust fund. That person carries the wish of the grantor, so you should appoint a trustee who you think is trustworthy. Trustee executes the wish of grantors when they pass away, so you have to be mindful while choosing the trustee.
Once you have outlined the details above-mentioned, it will be easier for you to set up the trust fund. You have to decide what assets you want to place in the trust fund and how they will be distributed and managed. One of the major parts of setting up a trust fund is choosing your beneficiaries and trustees. You also have to consider what conditions will apply to the trust fund and its duration. Discuss everything with your financial advisor before making a final decision, and you may also get advice from your family members and friends.
Make your Trust Fund Official
Different online service providers offer trust fund services, but it is not something you can consider safe and reliable. Setting up a trust fund is a complicated process, so to keep things official, you have to get the assistance of a professional trust or estate attorney. You can ask people in your social circle for referrals. Working with a competent financial advisor can get the right guidance.
You can find the list of attorneys by consulting local and state bar associations. It will help you follow the right direction as these associations are familiar with state trust laws. Fees can vary, so you should make the final decision by making a comparison of prices. Also, go through the past track record of the attorney before making a final deal.
To make things official, your attorney will create proper documentation, which will include a deed of trust and a declaration of trust. The document can be long or short according to the type of trust, assets, and number of beneficiaries you have listed. You need to sign the document once your attorney provides you with a complete document. State laws can vary, so your attorney can guide you on what conditions apply to your trust fund as per your state.
Fund your Trust
After building trust, you need to fund it. You have to take your documents to the bank to open a trust fund back account. Make sure that you are opening this account with the same name you have created the trust. You have to provide the complete details of the trustees, including their names and contact numbers. Whether you want to deposit the amount or pay it over time into the trust is your choice. The fund will become the new owner of the assets eventually.
Registered your Trust Fund
At last, you need to register your trust fund for tax purposes. Every trust fund requires the taxpayer identification number (TIN) for financial accounts, tax returns, and other financial needs. It is also known as the equivalent of the employer identification number (EIN). You need to register the trust fund with the internal revenue service (IRS). You can do it simply by logging in to the website of IRS. But if you prefer documentation, you may download the form from the website and submit it.
Establishing a trust fund can be a confusing and complicated process as different legal aspects are involved in it. But with the right knowledge and guidance, you can take the right steps that will ensure a smooth process. You must know that getting professional assistance from experienced financial advisors is a must. It will make things easier for you for the entire process and save your time and effort, helping you set up a trust fund hassle-free.