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What Are Financial Trusts, and Why Do You Need One?

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A financial trust is a legal entity that holds your assets for your beneficiaries. The grantor creates and funds a trust and names beneficiaries to receive the trust’s assets.  Grantors choose a trustee responsible for managing and distributing assets according to the trust’s terms. You can name yourself, another person, or a bank to be the trustee.

Benefits of Trusts

  • Minimize estate taxes.
  • Shield assets from potential creditors & avoid the expense and delay of probate.
  • Preserve assets for your children until they are grown.
  • Set up a fund for your support in the event of incapacity.

The benefits you and your beneficiaries gain from a financial trust depend on the type of trust you select. You may need more than one type of trust to accomplish all of your goals.

Living (revocable) trusts

You create a living trust while you're alive to own property such as your house, a boat, investments, or other assets. Because the property is not in probate, the trustee will transfer the assets to the beneficiaries according to your instructions. You maintain control and can change or dissolve the trust as long as you live.

Irrevocable trusts

Irrevocable trusts are valuable estate planning tools that can't be changed or dissolved once created. Your estate tax liability may decrease and provide more for your beneficiaries. Property transferred to beneficiaries will avoid probate and may offer creditor protection.

Testamentary trusts

Testamentary trusts don't begin until your will is probated. Then, selected assets passing through your will can "pour over" into the trust. These types of trusts give you limited control over how the assets are used, even after your death.

To learn more about your trust options, call the Horizon Trust team at (219) 873-2683.

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