A trust is a legal means to manage your estate or pass on wealth of any size or amount. Whether you are a millionaire or not, you can establish a trust to see that your assets are managed in a way that you want, even if you are not able to manage them yourself. Take the first step in making sure that your assets are protected by learning the basics of how a trust works from the team at James C. Provenza and Associates.
What is a Trust?
A trust is a legal framework that puts your money or assets (house, vehicles, and other things of value) into a legally binding management account. Once placed in the trust, your assets are managed by a trustee who is responsible for following the instructions established when the trust is formed.
Why Should I Want One?
Forming a trust allows you to separate your assets from yourself. That way, you can either give them to someone else after your death or have someone manage them for you while you are alive.
Many seniors with considerable wealth form a trust so that their trustee can manage their assets as the seniors are no longer able to because of illness or old age. Likewise, you have probably heard of children inheriting wealth from their parents through a trust when they turn 25 years old. Both of these methods of managing wealth are used often.
Benefits of Forming a Trust
The primary benefit of forming a trust is that your assets are separate from yours, like how an LLC company is separate from the person who founded the company. It gives you a way to manage your wealth without having to be directly involved in the day-to-day management of it.
Alternatively, trust is also an effective way to pass wealth on to the next generation even if you are not alive to do so.
Putting assets in a trust can also provide tax benefits if managed in a certain way. The income from the assets is treated differently and you can receive a portion of that income without having to pay taxes on all of it, lowering your tax liability.
Possible Drawbacks
Since the assets placed into a trust are no longer yours, you have less control over them. That means that you cannot sell them or make changes to them as you see fit. It is up to the trustee to handle such matters. This could be problematic if your house, for example, is in the trust.
Another possible drawback is that you cannot take the assets back if you dissolve the trust in most cases. This restriction is in place to prevent people from forming and dissolving trusts unnecessarily, but it does mean that you may have to find another way to get the assets back if you do have a reason to dissolve the trust.
Consult a Lawyer for More Information on Trusts
A trust can be a valuable asset in building or maintaining wealth, but it can also be complex to set up and manage. If you think trust is the right option for your situation, consult a lawyer for more information. We can help you determine the best way to use a trust to secure your wealth. Call James C. Provenza & Associates, P.C. at (847) 729-3939 to schedule a free consultation.
