*Special Advertising Section*
Tom Saxon, Financial Advisor; Tammie Schnable, Client Services Associate; Talli Oxnam, SVP, Manager; Lori Wrightson, Wealth Management Operations Manager; Lora Davis, Financial Advisor
WEALTH MANAGEMENT | ESTATE PLANNING | FINANCIAL PLANNING | TRUST SERVICES
What is a trust?
A trust is a legal entity that holds assets for the benefit of another. You can put practically any kind of asset into a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. The assets you choose to put in a trust depend largely on your goals.
When you create and fund a trust, you are known as the grantor (or sometimes, the settlor or trustor). The grantor names people, known as beneficiaries, who will benefit from the trust. Beneficiaries are usually your family and loved ones but can be anyone, even a charity. Beneficiaries may receive income from the trust or may have access to the principal of the trust either during your lifetime or after you die. The trustee is responsible for administering the trust, managing the assets, and distributing income and/or principal according to the terms of the trust. Depending on the purpose of the trust, you can name yourself, another person, or an institution, such as a bank, to be the trustee.
Why create a trust?
Trusts are often used to:
- Minimize estate taxes or shift part of your income tax burden to beneficiaries in lower tax ackets
- Shield assets from potential creditors and avoid the expense of probate
- Preserve assets for your children until they are grown
- Set up a fund for your own support in the event of incapacity
- Provide benefits for charity
There are multiple types of trusts. A living trust is a legal entity that you create while you’re alive to own property such as your house, a boat, or investments. Property that passes through a living trust is not subject to probate, it doesn’t get treated like the property in your will. The trustee will transfer the assets to the beneficiaries per your instructions. Living trusts are attractive because they are revocable. You maintain control and you can change the trust or even dissolve it for as long as you live.
Unlike a living trust, an irrevocable trust can’t be changed or dissolved once it has been created. You generally can’t remove assets, change beneficiaries, or rewrite any of the terms of the trust. Still, an irrevocable trust is a valuable estate planning tool. First, you transfer assets into the trust--assets you don’t mind losing control over. You may have to pay gift taxes on the value of the property transferred at the time of transfer. If you have given up control of the property, all the property in the trust, plus all future appreciation on the property, is out of your taxable estate. That means your ultimate estate tax liability may be less, resulting in more passing to your beneficiaries.
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