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Trust Administration Tips: Benefits of Setting Up a Trust

Sunday, May 4, 2014

A trust fund is an important part of your estate plan when you want to leave money to your minor kids. It ensures that your money handled by a trustee, is set aside and made available to to them when they reach a certain age. Often, setting up and managing trust funds are complex and time consuming. Also, it can cost a significant amount of money, so you should have a compelling reason to want to set up a trust fund.

Below are some benefits and purposes for using trusts:

Irrevocable life insurance trust is one common tax-saving trusts. After your death, all profit from your life insurance policy is added back into your estate, which often turns an estate that's not subject to federal taxes into an estate that needs to write a check to the IRS.

But an irrevocable life insurance trust secures life insurance death benefit revenue from estate taxes. After you set up a trust fund, you still have life insurance, and the beneficiary or beneficiaries still get the proceeds from your insurance policy upon your death. For now, estate taxes may not be a an issue.

By keeping any of your properties out of your probate estate, you could avoid many of the issues on lack of privacy, costs, and hassles about probate.

PROTECTING YOUR ESTATE (and the estate of the recipient or recipients:
One of the central purposes of trust funds is to safeguard your property even after it becomes part of someone else's estate.

For instance, you want to leave a huge amount of money to your only daughter, but you are concerned that before you can say, marry before you turn 30 she'll have spent the money.

In such case, you can use a trust fund to parcel out the money to him or her as you see fit. The trust fund could give him or her a little amount every year for duration; and then a final lump at a certain age when you think she will be mature enough to protect the money as if she had actually earned it herself.

You have the option to add conditions on how the amount in the trust fund is dispersed, such as your daughter gets a portion of the money when she finishes college, for example, or when she meets the criteria you have established when you set up the trust fund.

A trust fund can make money available to your children and grandchildren, relatives, even to non-relatives, such as friends and/or employees, for educational purposes, such as living expenses and college tuition.

You can also donate money to charities by setting up some type of charitable trust that may, for instance, yearly give a specific sum of money to the charity organisation while you are still alive and give a bigger sum of money after your death.

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