Many people fail to realize how easy it is to use trusts to manage family wealth. This is probaby due to a lack of knowledge. But trusts are easy to understand. A trust basically establishes a legal entity that holds funds or assets for the person who created the trust. This is called the “grantor” or “donor.” The grantor will appoint an entity that will manage the trust, such as a bank or trust department. A beneficiary will also be named. This is the person who will ultimately benefit from the trust.
There are essentially two different types of trusts: living (which operate during the grantor’s lifetime) and testamentary trusts—trusts created under a Last Will that will come into effect after the grantor’s death.
Basic Classification of Trusts
Several other classifications of trusts also exist. These trusts can help manage family wealth and are
designed to determine the way in which the assets will be managed. They also take into account the specific types of assets and funds attributed to them:
- Revocable trusts – allow you to have more control over the funds in case you wish to change various terms. However, irrevocable trusts require the presence and consent of the beneficiary for such modifications.
- Qualified personal residence trusts – are designed to basically remove the value of your property. Apply these to homes likely to appreciate in value.
- Credit shelter trusts – allow you to write a will that can pass a portion of your estate to your spouse or other beneficiary tax-free.
- Generation-skipping trusts – generally make it easy to select only the second generation of descendants as beneficiaries (usually grandchildren).
The Bottom Line?
Setting up a trust fund can be a great advantage, regardless of the purpose you have in mind. You must do some research to determine which type of fund would best apply to your situation. This will be quite easy to get the most beneficial results possible out of the endeavor.
What’s your next step?
Be sure to speak with a qualified attorney before proceeding with any trust. There are unscrupulous peddlers who sell fake trusts that falsely promise major tax breaks. Click HERE to contact our office to schedule a free consultation.
If you’re interested in learning more about Trusts, start with a quick review of the Illinois Trust Code by clicking HERE.