Friday, January 11, 2019

Six Reasons To Have A Family Trust

By Patricia Young

When one would hear of the word trust from a financial perspective, most would think of a bank account that is left for the next generation. While this is partly true, a family trust is actually much more than just that. It is actually a passing on of certain assets or properties from the parent to the child during a certain time in the childs life to help him or her live. Here are some reasons as to why setting one up is very important.

The first and most important reason to have trusts is for the parent to ensure that the child is taken care of. In the event that the parents are no longer there, money will at least be put aside to pay for all the expenses of the child. It will also help the child start up his or her career when he or she reaches a certain age of adulthood.

Another very important benefit of trusts is that it can protect certain assets from creditors. If one owns an asset, for instance real estate, and puts it into trusts for his children, creditors will not be able to touch that piece of land. This rule applies even if the original asset holder still has an outstanding debt.

Under the marriage or relationship law of most countries, married couples must have equal access to each others assets after marriage. Now, if a parent does not want the spouse of the child to have control over a passed down asset, then he can put it in trusts. That way, only the child will be able to enjoy the asset without the spouse eyeing it.

Now, trusts are pretty amazing because they are quite flexible. One can make them as free flowing as possible or even impose limits so that the money inside will not be misused. For instance, parents can impose limits on the trusts of their children to make it let us say only for education purposes or only for living expenses.

If one is a divorcee, there is a chance that the former partner may be able to get some of the assets when he dies. In order to prevent such a thing from happening, one can actually put his assets in trusts for his children. That way, all of the assets that he will leave behind will only benefit the children and not the former partner.

Lastly, trusts can actually reduce certain taxes. When one dies but puts a piece of property in several trusts to his children, the piece of property will not have to go through so many levels of real estate tax. That is one way of very effective tax avoidance.

As one can see, family trusts are very crucial to most families because it already ensures everything will okay with the children when the primary owner of the assets dies. In a way, it is a form of planning in order to avoid any internal conflict in the next generation. Trusts are actually more effective than wills since trusts are more solid in structure.

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