Do You Need A Trust or Foundation to Control Your
Assets?
They are not just for the rich and famous anymore
By Jeffrey D. Voudrie, CFP
May 12, 2008 - Trusts and private foundations
aren’t just for the rich and famous like Warren Buffet or Bill Gates.
Nowadays, even people of modest means are realizing the great benefits
trust and foundations can provide. Read on to see if you can, too.
There are many different kinds of trusts and
foundations, but they all share a common element—control. Using them,
you can control what happens to your assets while you are alive, in the
event of incapacity and for generations to come.
For instance, a trust is highly recommended if you
and your spouse each have children from a previous marriage and you want
to avoid any conflict when one of you passes away or becomes
incapacitated.
A trust can be just the thing if you are concerned
about a child losing their inheritance in a divorce. And in today’s
litigious society, trusts can be used to shield assets from lawsuits. A
trust can be as simple or as complicated as you need it to be.
Foundations have many similarities to a trust. The
main difference, though, is that foundations are designed specifically
for charitable, religious, educational, scientific or literary purposes.
Like a trust, a foundation allows you to control
how the assets are invested, who they are distributed to and when. Plus,
there are tax benefits for transferring assets into a foundation that
aren’t available with most trusts.
If you expect to leave several hundred thousands of
dollars in assets to charity, a foundation may be right for you. That’s
especially true if you want the assets invested and each year’s earnings
distributed to a special cause.
There’s more involved in setting up a foundation as
compared to a trust. They also require more work. Accurate records must
be kept and informational tax returns must be filed. For those with much
smaller contributions, it may be easier to donate the money or assets to
an existing organization as opposed to forming your own.
But it may be easier to donate a significant amount
than you think. You might have a life insurance policy that you’ve had
for years that you no longer need. Instead of canceling it, you can name
your foundation as the beneficiary. If fact, life insurance is a great
way to not only provide the initial funding for a foundation, but also
to help it increase in size over time.
I mentioned tax incentives. Appreciated assets like
real estate or stocks can be transferred into a foundation (and certain
charitable trusts). That way capital gains taxes don’t have to be paid
and you still get a tax deduction for the contribution. The result is
that your charity receives more money than if you sold the asset, paid
the taxes and donated the remainder.
There are different versions of charitable trusts.
Some allow you to donate an appreciated asset, get a tax deduction, and
receive an income stream for life. When you die the remainder can be
used by your favorite charity. Another version is similar but the
charity receives the income stream during your life and your heirs
receive the remainder at your death. This can be beneficial if you have
investment property that has greatly appreciated, you need income and
you don’t want to pay all the taxes.
In can cost thousands of dollars to set up a trust
that allows you to avoid probate and protect your child’s inheritance
from a lawsuit. Foundations can be even more expensive. But they don’t
have to be.
If you are comfortable doing research on your own
and are willing to take the time, you can set up a trust and/or
foundation on your own very inexpensively. Legally, you can serve as
your own attorney and draft your own estate documents. There are many
sources that provide templates. If your situation is straightforward,
all you have to do is fill in the blanks.
For those with more involved situations an
experienced attorney is recommended. Even if you do it yourself, it’s
not a bad idea to have an attorney review it. Lastly, a trust does
nothing for you unless you transfer assets into it. Don’t forget that
step or all your work will have been for naught.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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