A family trust, also called a living trust, is set up to transfer assets to provide for and protect the beneficiaries of the trust. The trustee, the one who sets up the trust, decides how, when and in what amount the assets in the trust are distributed. A family trust is used to protect assets, plan an estate and also provides tax advantages.
Tax Advantages
Setting up a family trust helps lower inheritance taxes for people who stand to gain a lot upon the death of a family member, says Trustmakers.com. A person cannot set up this type of trust solely for tax advantage purposes, but it can help them in the long run. Income in the trust that is not distributed can be taxed. A trustee can distribute this money to any beneficiary for any purpose they see fit.
Provide
A family trust provides for the beneficiaries named in it. The money can be distributed in case of emergencies, including home repairs and medical emergencies, and can also be used for college expenses. Many people set up a family trust so that they have funds for rest home care. Having a trust of this type also benefits the family should the trustee die because they are able to avoid probate, which for those without a trust means that distribution of assets must be decided.
Protection
Protection is a big reason why many people choose to form a family trust. It protects changes in capital and claims against an estate at time of death, according to Trustmakers.com. Many families choose to set up a trust to protect them from a failed business venture. It protects them from creditors should a family business go under. Finally, a family trust can be used to protect a person from having to divide property in the case of a divorce.
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