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Setting up a Trust: What is it and Why would You?

A trust is not the same as a will, though it does fall under the umbrella of estate planning. Where a will designates the distribution of assets and appoints an executor to ensure their accurate and efficient dispersal, a trust is usually set up to protect assets and a trustee is appointed to manage said assets.

Asset distribution may be part of a trust agreement, but not in the same sense as a will and rarely in such a way as to completely divide and give away all property. For example, a trust may be set up by a parent or grandparent to care for a young family member who is not yet old enough to manage his own funds.

In this case, a trustee may be in charge of watching over assets, protecting them and using only enough to maintain the child's standard of living. Once the boy is old enough to inherit the assets, they would likely be passed to him.

As mentioned, asset protection is the biggest goal in most trust plans. Some popular estate planning uses are:

  • minimizing estate taxes
  • bypassing the delay and expense of will probate
  • setting up an emergency fund for your own benefit, should you become incapacitated
  • providing funds to a charity, organization or university

While extremely useful in many situations, setting up a trust is not as beneficial for everyone. Before going too far down that line of thought, it is worth setting up an appointment with an attorney experienced in trust law.

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