So what exactly is a trust? You hear about wealthy people setting up trusts for their children so it must only be for those that are rich, right?
Not at all. A trust protects the ownership of your assets while you’re alive. So even if you’re not wealthy, but own a small business, a trust can protect your home in the event the business fails. It can even protect assets from a ex-spouse after you die.
The ownership of assets is transferred over to the trust, but you can continue to use them while you are still alive. So if you put your home into a trust you don’t own it anymore, but you can still live in it for the remainder of your life if you choose.
There are three people involved in the creation of a trust, and one person could fill a few different roles. The settlor would be the person creating the trust, or you; the trustee manages the trust, which could also be you while you are still alive; and the beneficiaries, which could also be you and other family members.
In the event of your death the trust will leave specific information on dividing your assets. One of the best aspects of a trust – it can be tax-free to the people who inherit your possessions. In 2013, the law was changed exclude estates under $5.25 million from being taxed. Anything above that threshold could be taxed up to 40 percent.
No matter what your net worth is a trust can be a valuable tool to have while you are living and after your passing. You should always speak with a lawyer in your jurisdiction to get the most up-to-date legal information on setting up a trust.
For more information on wills or trusts, please feel free to contact The Law Office of Bradley R. Tengler in Rockford, IL at 815-981-4859 for a free consultation. Please note, the above does not constitute legal advice. Please discuss your specific rights with an attorney in your own jurisdiction.
Sources: CNN Money, “Get ahead of your estate planning”
Sorted.org, “Family trusts”