Trust Fund FAQs

Posted by on Apr 22, 2022 in Legal News |

Trust funds aren’t just for the rich and famous, though they’re often what people think of when they think of wealth. Anyone can have a trust fund, as these estate planning tools provide a useful, efficient, safe way to transfer assets to heirs. In this article, we will go through the top ten trust fund FAQs and their answers. 

1. What is a Trust Fund? 

In short, a trust fund constitutes an independent legal entity. This entity holds property and assets (land, cash, etc.) for the benefit of a person or organization. Trust funds are often used in estate plans to hold businesses, property, investments, and, of course, money. 

2. Who is a Trust Fund For? 

A trust fund is for anyone you want to give assets to. Less than two percent of the American population has a trust fund, and the median amount in it is $285,000. This does not mean that people will less money cannot have a trust fund. If you want to transfer your assets to a beneficiary, that is enough to look into a trust fund. 

3. What are the Benefits? 

Trust funds have various tax benefits, and they can be an invaluable tool, giving you a lot of control over how your assets get distributed. They remain private, and they distribute cash over time. They cover assets that a will might not be able to, such as retirement plans and life insurance policies. 

4. What are the Disadvantages? 

If you choose a revocable trust, you’ll have more control, but the tax advantages, stamp duty, and estate tax will be far less beneficial. On the flip side, if the trust is irrevocable, you do not have control over the assets that you put into the trust. 

5. How Do I Set One Up? 

You’ll need an attorney to help you decide how you want to set your trust up. They will help you create the trust document, which will need to be signed and notarized, and set up your trust bank account. Then, you will transfer the assets into the trust and name your trustee and beneficiary. 

6. How do Trust Funds Pay Out? 

There are several different ways that a trust fund can pay out. They can pay in a lump sum or percentage, or the fund can make incremental payments over time. The distributions can even be made by the trustee’s assessments. Whatever you decide, you have to include this distribution method when you draw up the trust. 

7. Who Controls the Trust? 

The trustee controls the trust for the beneficiary’s benefit. Sometimes, people choose a bank, lawyer, or financial adviser to serve as trustee, as they know more about investments, money management, and taxes than the average family member. If you have a large trust or one with complicated assets in it, this corporate trustee might be a good idea.

8. What if I Change My Mind?

If the trust is revocable, as the name implies, you can alter it or revoke it at any time. The first step is to remove the assets in the trust. The procedure for trust revocation varies based on where you live. 

9. Are These Funds Taxed? 

Trust beneficiaries have to pay taxes on distributions from the trust. Taxes differ depending on the type of trust, however. 

10. I’m Confused—What Now? 

If you’re reading this guide and find yourself confused, don’t worry. Contact a financial adviser or attorney for questions on how to get this process started. 

This short guide should set you on the right path to understanding what a trust fund is and how it can help your family. Contact a financial or estate planning attorney to learn more.  

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Protecting Your Basket

Posted by on Apr 15, 2022 in Legal News |

Easter is here, and, even if you don’t celebrate, you’ve probably heard the saying, “Don’t put your eggs all in one basket” before. This saying is used to caution people against putting all their effort, time, and money into one thing. For example, if you’re starting a business, you might hear that phrase as a way to warn you against relying too much on that endeavor as your sole source of income. 

As estate planners, we believe that you can put all your eggs in one basket, as long as you protect the basket. Whether it’s building a new house, starting a new business, or getting married, going for broke is fine, as long as you have the necessary precautions in place.

Ways to Protect Your Business

Estate planning for businesses is a common theme in this legal field. Businesses are peoples’ prides and joys, and they want to ensure that the company is protected long after they are gone. Here are some estate planning tips for businesses that you may or may not have heard of: 

  • Basic Will/Estate Plan. You always want to start with this. You should have your own personal will and estate plan, including important documents like power of attorney(s), before you begin planning for your business. After all, you are the owner. 
  • Tax Efficiencies. If you hire an estate planning attorney, chances are, as long as that attorney is competent, you’re going to be able to legally save some money on your taxes. That’s another reason why business estate planning is so important—you can cut your tax burden down if you do it properly. 
  • Family-Owned Issues. If your business is family-owned, you will want to sort out any inheritance or takeover issues that are present before you draft the estate plan. 
  • Succession Plan. What do you want to happen to your business after you pass away? Drafting a succession plan, which should include all of the necessary information about your business and a detailed plan for what will happen when you’re gone, provides an outline for people to follow when determining the fate of your company. You can also draft a buy-sell agreement or a different document, depending on what you want to happen. 
  • Insurance. You should purchase life and disability insurance as a failsafe. That could provide you with the monetary resources you need to keep your company afloat if something happens to you. 

Marriage Considerations 

When you get married, make sure you update your estate plan to include your new spouse as a beneficiary. If you and your spouse want children, the birth of these children will also require an estate plan update. The same goes for the end of the marriage—if the nuptials end badly, you’ll want to make sure your estate plan does not include your ex. When it comes to marriage, be prepared either way. 

Estate Planning for Your Home 

Your home is likely one of the most important things in your life. Estate planning can help minimize the tax burden on your home, and there are several different options for transfer, if you want to pass your home down. These options include (but are not limited to): 

  • Co-Ownership. You can put your heirs as your co-owners on the current deed, though this simplistic approach does not work for everyone. 
  • Will. Of course, you can also pass down your home using a will. Just note that this document will have to go through the probate process in order to effectuate the transfer.
  • Trusts. Revocable trusts, as well as qualified personal residence trusts, are two options for passing your home down that do not require going through probate court. 
  • Transfer on Death. This “TOD” deed is not offered in Florida. But, if your family owns property in other states, this could be a quick, private option for home transfer. 
  • Selling. If there is no one who wants your home, you could sell it and rent a house later in your life, though there are a lot of factors (bills, health, lifestyle, taxes, ad maintenance) that factor into whether this option will work for you. 

Essentially, you should follow your dreams, but you shouldn’t rush headlong into them without some sort of estate plan. Contact a WFP attorney to discuss ways to be daring and bold while also being reasonably cautious.

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Protecting Digital Assets 101

Posted by on Apr 7, 2022 in Legal News |

One of the biggest estate planning mistakes that people make is they forget to protect digital assets. Cryptocurrency and NFTs are becoming more and more popular and, though some coins are super-expensive, others are quite affordable. Crypto exchanges and the like have given people all over the world a chance to own coins with blockchain technology. 

And, because these digital assets have value, they should be included in your estate plan. This article will consist of a brief overview about how to protect digital assets when estate-planning. As always, contact an estate planning attorney with experience in managing these digital assets if you have questions. 

What Constitutes a Digital Asset? 

Pretty much everyone owns a digital asset. Digital assets are personal property kept online or in the digital world. Technically, domain names, electronically-stored videos and photos, emails, and social media accounts are al digital assets. When it comes to estate planning, these digital assets matter. 

But, in the context of today’s day and age, we’re referring to cryptocurrency and other personal property with value. Digital assets are just like real-life assets. You can inherit them, but, if your estate plan doesn’t provide for them properly, your heirs will not be able to access them. As people have more and more of a digital presence, digital asset estate planning is taking on a new importance for estate-holders of all ages.

Four Steps to Note

Obviously, everyone’s digital assets are different, so this “four step plan” is not a hard and fast rule. These steps are just ways to, in general, organize your digital estate plan. An attorney can help you with each. The steps are as follows:

1. Make a list. The first thing you want to do is actually name the digital assets you own. That way, your loved ones know where to find your assets. Possible assets include important passwords, social media and email accounts, and digital property like virtual currency, money transfer apps (Venmo, CashApp, etc.), and domain names. Store this list in a secure location when you have finished it. Make sure your family members know where it is and how to access it. You can even use apps like LastPass and 1Password, which help you manage your accounts, to help make this task easier. 

2. Ensure you own the assets. You may have thought you purchased a digital asset, but double-check to make sure you didn’t just buy a nontransferable license to use the asset. For each of the digital assets on your list, make sure you can track down ownership documents to both ensure and prove that you are the true owner. 

3. Back up cloud-stored data. FidSafe, a free, secure online safety deposit box, is one example of this extra layer of protection. If you have digital assets stored within the cloud, you should back them up onto a storage device or local computer. Do this regularly so that your fiduciaries and family members can access them without running into many obstacles. 

4. Provide consent. This is where a qualified estate planning attorney, preferably one with experience with digital assets, comes in. Work with the lawyer to update your estate plan to give lawful consent for asset providers to divulge electronic communications to authorized people. Consider what information you want to be available, as a blanket authorization might not be appropriate. 

Benefits of Digital Asset Estate Planning 

When you create this estate plan, you’re ensuring that your digital assets are secured not only for your heirs, but also from hackers, fraudsters, and identity thieves. It is just as important a part of estate planning as anything else is. You can even set up different tools, such as a Digital Asset Protection Trust, which act similarly to other trusts. There are a lot of options for digital asset planning and protection out there.

Hopefully, this short guide has helped give you some insight into digital estate planning. As these assets become more and more common, it would not be surprising to see estate planning and digital assets turn into an even bigger topic than it already is. Get ahead of the curve and formulate your plan today. Call WFP and get the help you need. 

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