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Should I Open a Trust?

Man financial planning with change in a jar on the table

A lot of our clients come to us with this question – should I open a trust? There isn’t a black and white answer for everyone, but we do recommend it to a lot of our clients.

Here are the three main reasons why we recommend opening up a trust.

Why You Need a Trust Reason 1: Control Distribution

You’ve worked hard. A lot of blood, sweat and tears have gone into your work, and your loved ones are able to enjoy a great life because of it.

However, maybe you aren’t confident they know how to manage their money well. For example, maybe your son spends all of his money on a hobby like video games instead of saving it or perhaps your daughter eats at restaurants every day of the week and isn’t investing any money.

We see this kind of situation all the time. The specifics are always a little different, but the overall situation is the same. You have money you want to leave for your loved ones, but don’t trust their ability to manage it well.

Here is where a trust can definitely help. You can set up a trust so it distributes money how you want it to. For example, you can have it pay your beneficiary a set amount every month until it’s gone. That way they can’t just blow it all at once.

A trust gives you peace of mind that you’re giving your loved ones what they need: regular income to put food on their table and a roof over their heads.

Why You Need a Trust Reason 2: Tax Protection

Depending on what type of trust you set up, you can receive some great tax protection benefits. For example, an irrevocable life insurance trust will protect the beneficiaries from having to pay estate taxes on the life insurance payment. This is huge, because these taxes are usually very high.

Typically clients will set up a different type of trust, called a revocable living trust. This type of trust can be setup to help reduce the estate taxes your beneficiaries pay.

From a financial standpoint, tax protection is the most common reason our clients open up trusts with us.

Why You Need a Trust Reason 3: Benefit Institutions and Charities

Is there a charity that is near and dear to your heart? How about an institution, like your alma mater, that you would love to give back to?

A trust is one of the best ways to give to these organizations. There are several options available. For example, you can set up a trust that regularly gives money while you’re alive, then sends the rest to the charity when you pass away. You can also have it regularly pay money to a charity after you pass, which is sometimes preferred since regular, steady income is important for charities and nonprofits.

Any Questions?

Do you have any specific questions about opening a trust? We’re here to help. Just give us a call at (714) 663-8000. We look forward to hearing from you!


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