Add Trust to Your (Financial) Relationships

by Guest

Financial trustCreating a trust is an effective way to manage and protect your assets in your lifetime and after you’ve passed away. Mostly, people often set up trusts with the intention of providing financial security for children, a spouse, or other loved ones. There are several different kinds of trusts and reasons for their creation. Here are a few trust options to help make an educated decision on which is right for you.

A Living Trust, also know as a Revocable Living Trust or a Family Trust, is a legal document that holds ownership to your property and assets. With this you are able to use and control your assets during your lifetime and oversee how they are distributed while you are alive and after death. When you transfer your title over to the trust you don’t relinquish any level of control.

“You’ll still be able to sell, borrow, or transfer portions of assets to and from the trust. It’s like a will, since it has many instructions for handling financial matters upon your death,” said Charles Bulger from  “Using a Living Trust has many benefits, such as preventing the courts from controlling your assets, gives control of your assets to the person of your choosing, and bypasses probate.”

A Testamentary Trust is the most common type and, unlike a Living Trust, takes effect when the principal party dies. It is usually tied to a will and will help eliminate or reduce estate taxes for your beneficiaries. However, it will not avoid probate. These trusts are often created for minors or young adults, who will receive funds to be distributed at the guardian’s death. There is usually a specified legal guardian or trustee that will look after the funds and their distribution. The appointed trustee will have a portion of control over the trust until the person or persons that the trust is intended for comes of age. At that point, the trust expires, and the funds are distributed. These are designed to protect inheritors and helps manage large sums of money.

There are many different variations of these trusts, and individuals are encouraged to speak with a financial advisor to help evaluate which trust is the best option. You’ll also want to consult your bank, attorney, or a financial advisor to establish a trust and obtain the appropriate documentation. Think about who the trustees will be, and how many parties are included in this trust based on need and available resources. As a side note, there are estate planning software programs that will help you along the way, while saving money on costly attorney fees.

Setting up a trust isn’t just for rich individuals. It can also include life insurance policies, other investments, and their distribution. It’s just a preferred way of ensuring the financial security of your loved ones after you’ve passed. Consult some of these resources and tips, and consider diversifying your investments to establish a line of security for those you care about most.

This guest post is authored by Scott Archuleta.

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Bret @ Hope to Prosper April 7, 2011 at 1:15 pm

I have thought a lot about this subject lately. I would like to shield my assets from frivolous lawsuits that are rampant in California. I haven’t gotten a trust together yet, so I bought an umbrella liability policy.

Kay Lynn April 11, 2011 at 12:05 pm

Bret, that’s a good idea. We haven’t done a trust yet either.

Marie@familymoneyvalues April 11, 2011 at 7:05 pm

A lot of folks used to set up living trusts to ensure that each spouse’s lifetime exclusion amount was utilized to it’s fullest. The lifetime exclusion amount is the amount of money that is exempt from estate or gift taxes when a person dies. A recently passed change in tax law now lets couples keep their entire exclusions without using a trust.

A couple of considerations if you each do have a trust:
– You need to ‘fund’ the trusts – i.e. transfer money from your single or joint accounts to the trust
– You need to keep your total couple assets appropriately allocated between the two trusts
– You may pay extra account fees because you are now maintaining two accounts at a brokerage and etc instead of one joint account
– A trust will not protect assets from creditors if you have the power to get at the money

I have an article on trusts in the Transfer Wealth section of my site.

Mandy April 14, 2011 at 11:58 am

My ex and I set up a living trust for our children when we got divorced. We funded the trust with assets that would otherwise have been divided split between. The trust is used to pay for all the children’s needs such as after-school activities, medical needs, clothing and travel etc. Essentially the trust takes the place of child-support.

When I hear of some of the child support battles friends go through, I am so thankful for our trust. It really has worked beautifully.

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