A trust fund allows the conditional use of your assets after you pass away. You may grant it to your family, specific individuals outside of the family, or to a cause. It provides control, privacy, employs cost-effective tax management, and helps avoid probate.
Contrary to popular belief, a Cook Island trust fund is not only for the wealthy class. Even those in the middle class can benefit from setting up a trust fund. That being said, below are things that you need to know when setting up a trust fund.
Establishing A Trust Fund
It’s never too early or too late to start a trust fund. If you’re a young professional looking for ways to develop yourself, learn about financial and legal matters such as trust funds. Continuous learning outside of your diploma will help build your future. In this case, learning how to set up a trust fund will ensure the financial well-being of those who matter to you.
-
Decide On The Type Of Trust You Need
Depending on what you need, there are a few types of trust funds you can choose from. These are:
- Living Trust – a type of trust that’s set up while the grantor is alive.
- Revocable Trust – a trust that the grantor can change or revoke anytime.
- Irrevocable Trust – the grantor cannot change or cancel this trust.
- Testamentary Trust – a provision that appoints an executor to manage the assets
Other types of trust funds are also for specific purposes, such as:
- Education trust – for the sole purpose of paying for one’s education
- Spendthrift trust – a trust that protects the assets of a beneficiary from creditors. It also limits the beneficiary access to the trust principal
- Special Needs Trust – set aside for the beneficiary who has disabilities
-
Create A Trust Agreement
To draw up a trust agreement, you must name the executor, trustee, and beneficiaries. It’ll also include particular instructions on how your assets will be distributed. Your trustee or trustees will hold your assets for you until the time of your death. Finalize the document with a trusted attorney’s help and sign it with a notary as a witness.
One thing to remember is that you can choose to do this by yourself or hire an attorney to create the trust and agreement. It’ll cost you up to USD$7,000. If your financial status is complicated– with incurred debts and fighting relatives–a trusted lawyer will help you navigate legalities.
-
Fund The Trust
As the grantor, you must transfer assets to your trust. Along with your signed documents, open a trust fund bank account using the executor or trustee’s name. Depending on the nature of the assets, there are also different ways that you can fund the trust.
Personal properties that come with a title, like vehicles, boats, aircraft, and mobile homes, and stocks and bonds must be set aside for the trust fund.
To transfer real estate into the trust, you may need to ask permission if your property is subject to the homeowner’s association laws. The association may need proof that the property is in a trust fund. With the help of a lawyer, you can gain the association’s approval with a copy of a memorandum or certificate of trust.
Other personal property without titles must be individually stated in writing and to be transferred to the trustee.
-
IRS Registration
Once the transfer is done, register the trust fund as a declaration for tax obligations. Every trust that one establishes needs a Tax Identification Number. You can do this by filing it online or by downloading Form SS-4 from the IRS website.
Conclusion
If you want to keep things smooth and not miss anything, a trust fund will ensure that your words and wishes will be made. Setting up a trust fund may be daunting to some, but you can always ask help from a lawyer. Attorneys are aware of the legalities you’ll be facing, and it’s always better to have assistance. You can research for a trusted attorney to guide you in the best possible way.