Setting Up Trust Funds

There was a time when setting up trust funds was only for the wealthy. Families were setting up trust funds as a way to protect and preserve their valuable assets. While setting up trust funds was not all that common years ago, with today’s internet millionaires and entrepreneurs throughout the world, more and more people are setting up trust funds.

Trusts can be broken down into two main benefit areas of focus. The first is to protect the assets for the beneficiary. Typically, the money and property are managed by a trustee that the family feels is responsible. By setting up trust funds this way, the beneficiary is unable to sell or benefit from the property. Rather, the trustee is in charge of all decisions related to the property. The second area of focus in setting up trust funds is to by means of the tax savings for the person setting up the trust. Wealthy people may prefer to submit gifts in trust to their children and grandchildren, thereby protecting their valuable accumulations. But caution must be exercised as there are special transfer taxes that can potentially apply when setting up trust funds. While there are gift tax laws that may protect the property, it is important to work with an attorney experienced in estate planning and setting up trust funds in order to protect your family from possible loss of wealth due to technicalities in the law.

There are rules when setting up trust funds. Recipients usually need to reach a certain age before collecting benefits. Many times the pay out is a set amount to cover living expenses.

The benefactors that are setting up trust funds for their relatives must also be careful, as once the beneficiary's name is placed on the document entitling them to the property, it is theirs legally. Once the trust ends and the property is distributed, the law has a mechanism for setting up trust funds that allows an accounting of how the trust money was spent by the trustee.

Most beneficiaries are aware they have had a relative setting up trust funds for them, though many times they are unaware of the true market value. But there is a certain level of comfort when knowing that a loving relative has worked diligently in setting up trust funds for his loved ones. However, there is always the possibility that a beneficiary, knowing they will soon reap the rewards, can develop poor financial habits because they relied on a trust fund for their future. If you rely on other than your ability to make a living, you could be in for a financial disaster.