Benefits Of Setting Up A Trust – Even If You’re Not Wealthy

The media often portrays "trust fund kids" as entitled heirs to gigantic fortunes, making it seem like the only people who can set up trusts are the fabulously wealthy. However, any person with assets can have a trust set up so that you can monitor how and when your money is spent by the recipients. Lawyers can help establish the trust and advise on the particulars, but it's still helpful to know some of the key benefits of setting up a trust.

Control Over Assets -- And Privacy

When your money is placed in a trust, you can establish specific rules for who will receive how much of the money, and when, and how that money is allowed to be spent. For example, if you want to set up a trust for a grandchild you can either specify it pays out when the child turns a certain age, or stipulate that it only pays out at age 18 if the money is being used for college.

Why would you want this much control, rather than the terms-free gifts of a will? For one, you can still be alive and see the money being used. Terms will also prevent your relatives, particularly the younger relatives, from foolishly blowing through the money you set aside to invest in that person's future.

But, another benefit of a trust over a will is that a trust doesn't become public when you die. In Canada, wills become public domain once you've passed on and all of your family members and friends will suddenly have a list of what assets you bequeathed to each person. 

Tax Advantages

A trust fund has tax advantages for both sides of the arrangement. You likely won't have to pay capital gains taxes on any assets within the trust, while the recipient can often accept the money as a tax-free gift. Depending on what's in the trust, such as real estate, you might also be able to limit your estate taxes. Further tax breaks can exist depending on the specific nature of the trust, such as if the money is only to be used for education.

Taxes aren't the only financial advantages, though. Assets in a trust are usually safe from situations where collections agents are seizing assets as repayment. A trust also doesn't have the probate costs associated with the settling of a will, which can greatly cut down on costs. Contact a lawyer, like George Murray Shipley Bell, to discover how you can set up a customized trust, and find out what tax breaks or other financial advantages might apply.