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Why Create a Trust?Trusts preserve and distribute wealth to meet a wide variety of personal and financial goals. Some people use them to shelter assets from future claims while continuing to collect income from those assets. Others use them pass wealth to future generations. Still others use them to provide for charitable organizations. While goals vary, some of the most common reasons to create trusts are to:
Minimize estate taxes
Shield assets from potential creditors
Preserve assets for children or grandchildren
Fund charities
Provide for personal care in the event of incapacity
Shift income taxes to beneficiaries in lower tax brackets. These goals can sometimes be accomplished outside of a trust, but often not with the same tax efficiency and certainty. Other times, these goals can only be met via a trust.
Here’s why. Trusts are legal entities created specifically to hold assets for the benefit of a beneficiary or beneficiaries—a person, a group of people, even another entity. Trusts enjoy specific legal protections that may vary from state to state. They can be funded with almost anything: cash, marketable securities, real estate, insurance policies, even privately held companies.
Different types of trusts can be used to meet the goals of the grantor—the person who establishes the trust. Some require the grantor to give up control of the trust assets immediately. Others allow the grantor to retain control of the assets during his or her lifetime and even collect income from the trust prior to their death. It is not uncommon for people to need more than one type of trust to meet all their needs.
As a financial advisor, you have helped your clients invest their money wisely. With a trust, you can help them protect it and ultimately distribute their assets according to their wishes.
To learn more about trusts and how they can benefit your clients, click here for our review of trust basics. But don’t worry about mastering all the nuances. Our professionals are available every step of the way to help you meet your clients’ trust needs.
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