There are many benefits to setting up a family trust, especially now that more and more individuals are amassing significant personal wealth. The purpose of setting up a family trust is to pass along your assets to the members of your family. Once you have set up your family trust, you gradually transfer your assets to it. Though ownership of the assets is no longer yours, you still maintain control of, as well as benefit from, these assets. Setting up a family trust can be done even if you are still alive or as a part of your last will. To set up a family trust you must choose a trustee. Next, the beneficiaries must be established. The trust must be established with an initial deposit of assets, and then as the time goes by, additional assets will be transferred to the trust.
A trustee is the person, or people, who will be responsible for managing the trust. The trustee ensures the wishes of the individual setting up a family trust are carried out. When possible, the person establishing the trust will also be one of the trustees. In addition to carrying out the wishes of the trust founder, the trustee will maintain records about the trust. The trustee will be responsible for maintaining records of any interest as well as prepare any tax documents required for reporting the interest.
During the initial steps of setting up a family trust, the founder will select the family members that are to benefit from the assets transferred to the trust, the beneficiaries. It is possible to add beneficiaries like future in-laws or grandchildren at a later date. The founder of the trust can decide what kinds of benefits the beneficiaries are allowed to receive from the trust. The trustee then makes decisions about distributing benefits to the beneficiaries based on the founder’s decisions.
Once the trust deed, a legal document outlining the terms of the trust, has been drafted, the initial assets will be deposited into the trust. Often this is a nominal amount, but can be as much of the founder’s assets as the founder wishes. Over time more assets are transferred from the founder to the trust. At the time the trust is established, the founder will determine by what age he or she wants all of their assets to have been transferred to the trust, often this is the age the founder plans on retiring. Assets can be transferred by regular deposit, the frequency of which should be established while setting up the family trust. The goal is to have all personal assets transferred to the trust by a predetermined time.
When setting up a family trust, the founder of the trust must determine if the cost of maintaining the trust will be outweighed by the benefits of received from the trust. As more and more people are building significant wealth, it is becoming common to see people setting up a family trust to ensure that all family members can benefit.