Trust funds guide
A Trust is perhaps the best channel to keep your money and other
assets safe and secure for your future generations. It is a
lawful creation that isolates your money for specific reasons.
A trust is beneficial even when the grantor is alive and after
his death. A grantor, settler or donor is the person who is
responsible for settling the trust. Trust funds can be set up by
single or a group of individuals. There are always some reasons
behind forming a trust. These reasons vary from persons to
persons. Besides the grantor, there is or are trustees. These
trustees are appointed by the grantor and they take care that
the trust is functioning according to the will or wish of the
grantor.
The first and the foremost benefit of a trust is the tax
saving. A trust can protect the grantor from paying huge taxes
and claims. Money kept in abeyance in the form of a trust can be
helpful in your old age when you take retirement, when your
children need money for higher studies or for the secure future
of your spouse or when you plan to do a venture in business etc.
The money enveloped in the name of trust is exempted from taxes
like the estate tax and the like. The tax subsidy actually
varies with the kind of trust you have formed.
Types of Trusts
* If a person is alive and forming a trust then such a trust is
called a living trust. Every trust including the Living trusts
can be bisected to form the- Irrevocable and Revocable trusts.
The former are those where the statements cannot be altered by
the grantor during his lifetime and even after that once legally
formulated and the in the revocable trusts the settler can
change his statements even after they are legally penned down
once till the time he lives. For instance a trust set up by
parents that provides for their minor children in case any
problem grips them. Both these types of trusts revocable as well
as irrevocable have their positive and negative aspects.
* There is also the Life Insurance Trust that ensures some kind
of financial safety for the survivors in case something happens
to the donor. A life insurance trust fund is better than a
simple life insurance policy because of the tax exemption. The
trust fund is not subject to the cumbersome Estate Tax while
when the beneficiaries receive the policy money it is
supplemented with this tax. Again there are pros and cons
associated with both, it is recommended to take the advise of an
attorney before reaching any conclusions.
* Bypass Trust is formed by a couple. When either of the
spouses die, the estate is transferred to the other and is taxed
and when they both die, it is taxed again.
* Spendthrift Trust- is a trust that allows you the opportunity
to let only those people benefit of the money that you think are
worthy enough. In simple terms via this trust you can safeguard
funds for the individuals you like, no one else can claim them.
* Living Children's Trust- is the trust to ensure a bright
future for your kids. The grantor can add clauses in it like the
child will get the funds only when he turns a major etc. and
till then the guardian (usually parents of the child) he
appoints will take care of the children and the trust fund.
* Charitable Trust Funds- the best philanthropic idea to help
the destitute throughout your lifetime and even after your death.
Once you make your mind which trust to go for, make some
profound thinking as to who will be its beneficiaries and at
what time, about the trustee, what exactly are the terms and
conditions, the taxes by the State, should the trust be
revocable or not and so forth. After all a trust is your
lifetime investment...you need not take any chances!