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.
One will also be happy to know that trusts are actually free from the hands of creditors. For instance, if one has some outstanding debt and will not want the creditors to chase after any assets, he can put the assets in trusts to his children. That way, the assets are fully protected.
If in the event a parent wants to leave an asset that only his son or daughter and not their respective partners can benefit from, he can do so through trusts. Even though most laws state that assets will be shared between husband and wife upon marriage, assets in trusts will not have to. With that, one can at least leave something that only his child will be able to enjoy.
Another great thing about trusts is that one can impose limits on them as to prevent the beneficiaries from abusing it. For example, if a parent wants to put educational trusts for his or her kids so that their tuition fees are covered, they can do so. That way, the kids will not be able to use the money for purposes other than education.
For those who are divorced, it is possible for one to actually prevent a former partner for touching his assets even after death. When one would put an asset in trust for his children, only his children will be able to benefit from the asset. That way, the asset is protected from the clutches of a greedy ex 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.
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.
One will also be happy to know that trusts are actually free from the hands of creditors. For instance, if one has some outstanding debt and will not want the creditors to chase after any assets, he can put the assets in trusts to his children. That way, the assets are fully protected.
If in the event a parent wants to leave an asset that only his son or daughter and not their respective partners can benefit from, he can do so through trusts. Even though most laws state that assets will be shared between husband and wife upon marriage, assets in trusts will not have to. With that, one can at least leave something that only his child will be able to enjoy.
Another great thing about trusts is that one can impose limits on them as to prevent the beneficiaries from abusing it. For example, if a parent wants to put educational trusts for his or her kids so that their tuition fees are covered, they can do so. That way, the kids will not be able to use the money for purposes other than education.
For those who are divorced, it is possible for one to actually prevent a former partner for touching his assets even after death. When one would put an asset in trust for his children, only his children will be able to benefit from the asset. That way, the asset is protected from the clutches of a greedy ex 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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