What is a Trust?
The media offers us many images for what a trust is and the type of person that has access to such a fund. The movies portray a young, immature teen galavanting around the country without a care in the world. But you can’t believe everything you see on TV, right?
Trusts are not reserved for a certain group of people, they can be used as a catalyst for your estate plan and the legacy you leave behind. A trust is a legal document that allows an individual to create a direct line of inheritance for their assets. This means that you can set up a trust to house your assets and, at a select point, transfer those assets to your chosen beneficiaries.
Let’s talk about what people typically put in a trust. You can fund your trust using a traditional checking or savings account, real estate, business interest, money owed to you through your business, life insurance benefits, and brokerage accounts.
You can’t (and probably shouldn’t - even if it was an option) fund your trust with your workplace retirement plan (like a 401(k)), or a Health Savings Account. Because these types of accounts are specifically going to be used for your own retirement, even if you could use them to fund your trust, it’s in your best interest to maintain full control over these accounts and keep them in your name with your beneficiary designations kept up to date.
People may say that three’s a crowd, but in a trust, there are often three parties involved:
The person who establishes the fund and supplies the assets.
You may think this refers to the person who obtains the assets, but in fact, a trustee is a person who controls the trust until the beneficiary becomes of age.
The person or people who receive the inheritance or assets within the trust.
It works like this:
Let’s say Kelli and I set up a trust for our sons Jorge and Theodore. I can elect my brother-in-law Kevin to be the trustee for the account. Jorge and Theodore won’t have direct access to the assets in the trust, and Kevin has control over when Jorge and Theo can receive the assets or until they reach the age I’ve designated in the trust.
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering comprehensive financial planning and investment advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends.