Is It Worth Setting Up a Family Trust?

A family trust entails a lot, yet provides many benefits for the future. The more you understand, the easier it is to decide if this is right for you and your loved ones.

Read further now.

Introduction

Getting things in order for the future and preparing for the end of life is something we must all look at. We never know when that time will come, but we want to make sure our loved ones are taken care of when it does.

There are lots of ways in which people may handle this preparation such as through wills and trusts, etc, though it is a very personal choice. What may be fitting and suitable for your family may not be so much for someone else’s family. That’s why it is good to get an idea of the options available – and speaking to an experienced attorney is a great place to start.

Family trusts are a popular option, but are they worth setting up? Let’s talk about it.

Why Consider a Family Trust

A family trust is set up to hold an individual’s assets that have been acquired throughout life. The trust then states the terms of how those assets will be dispersed after death (or incapacity). The person who sets up the trust for his or her family is known as the grantor. So all the assets that belonged to the grantor get moved over into the name of the trust once it is established.

The trust then becomes the rightful owner of the assets.

While in the family trust, the grantor has full control over the assets, but when he or she is gone, the trustee – who was appointed when the trust was set up – will take over. This trustee may be a family member, close friend, or even an uninterested party such as an attorney.

The reasons for protecting an estate using a family trust are often for things such as avoiding probate, potentially reducing taxes, and protecting assets to make sure they get to the right person at the right time.

The Difference Between Revocable and Irrevocable

There is a big difference between revocable and irrevocable trusts. When you hear people talking about a family trust, this is generally a living revocable trust. There is a big difference between the two even though both are set up but the grantor in much the same way.

A revocable trust can be changed throughout the grantor’s lifetime. He or she can add assets, remove assets, change the terms of the distribution, change the beneficiaries, etc. Or the grantor can terminate the trust altogether. While the assets become owned by the trust, the grantor still has control.

An irrevocable trust is different. This type of trust cannot be changed. The terms, the beneficiaries, or even how the assets will be distributed after death cannot be changed. The trust can also not be terminated. The assets placed in this trust fall under the control of the trust – not the trustee.

Life brings a lot of changes for a family. So, while an irrevocable trust may have some benefits, most family trusts are set up as revocable trusts.

Benefits of a Family Trust

So, what makes someone decide to set up a family trust rather than not? Lots of reasons. There are a few benefits that make a family trust seem desirable. These include:

Avoiding Probate. Probate is the legal process of settling an estate, paying off creditors, distributing assets, and so forth. The rights to assets get blocked until the probate case is closed. This could take a couple of months or it could take more than a year. Plus, probate cases don’t provide a very private form of distribution to family and open up your estate for others to see. A family trust will keep everything out of probate and will begin taking care of your loved ones immediately – and in a much more private manner.

Flexibility. You can move things in and out of the trust, make adjustments to things like beneficiaries, and even terminate it if you wish. This type of trust is very flexible.

Incapacitation. Sometimes things happen when you may become incapacitated. Your estate wouldn’t go through probate but things may come to a standstill. Having a family trust set up accounts for all our assets and has someone designated to manage them, whether you are deceased or incapacitated.

Tax Savings. When purchasing new investments, there is a reduction in taxes. And if it is then held in the trust for more than 12 months, you can gain on it thanks to it being potentially eligible for a 50% capital gains tax discount.

Protection from Creditors. Creditors have a right to a portion of the decedent’s estate to pay any monies owed. And those who have to file bankruptcy, assets are at risk. However, everything placed in the trust technically belongs to the trust and not the individual so they are protected from creditors.

So, Is it Worth Setting Up a Family Trust?

Setting up a trust can greatly help with protecting your loved ones. After death, if your estate ends up in probate, for example, your family will have no access to funds or assets belonging to you until the probate case has settled the estate. This may leave your loved ones vulnerable and unable to care for themselves — or live the life they are used to living.

With a family trust, you can prepare now for the future. You can place everything in the trust that is going to be protected while still being able to have control over it. This means that you can have the best of both worlds and can feel confident that when that day comes, your family will be secure.

You want to make sure that this is all done legitimately with an attorney. There are online packages and such that you can purchase and put a trust together on your own. But when you are referring to the safety and protection of your future, it is important to make sure everything is done appropriately and legally so that there are no questions or issues down the road.

Hire an experienced attorney who can help you set up a family trust that will serve you and your family well for a lifetime.