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Trust Funds Guide
By: Mansi Aggarwal
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!
About the Author:
Mansi aggarwal writes about trust funds. Learn more at http://www.whyatrust.com. |
