A family trust is used to support multiple family members.

Not all families are the same.

I have seen more than 3,000 enter my office over the last 30 years.

Some have close relational bonds.

Others are affected by trauma, addiction, and broken relationships.

Whatever the story, I see how my clients want to protect their assets for their loved ones and sometimes from their loved ones.

Trusts are good tools for accomplishing these dual goals.

And family trusts can even help provide for future generations of loved ones.

A family trust is one way to support your loved ones for generations.

What is a Family Trust?

The function of this trust mirrors its name.

Family trusts are created to manage and protect assets for the benefit of family members.

Assets held in the trust can include liquid assets like bank accounts or illiquid assets like real estate.

What is the Purpose of a Family Trust?

The goal of a family trust is to manage assets to benefit current loved ones and, as noted above, may include those yet to come in future generations.

Trusts afford greater protections for assets from creditors and may even reduce or eliminate estate taxes.

Although Kansas and Missouri do not have estate taxes, some people may still need to address the federal estate tax.

What Types of Family Trusts May Be Created?

The options of trusts available for family trusts reflect the types of trusts used for other estate planning goals.

Each of these has its unique benefits.

Living trusts are created while you are still alive, as the name implies, and can be irrevocable or revocable.

With irrevocable trusts, the terms of the trust are set and cannot be changed or terminated easily.

However, these very attributes provide greater tax benefits and protections from creditors.

In contrast, the revocable trust allows the grantor to serve as the trustee for managing the trust and to alter the trust as needed.

Unlike a living trust, a testamentary trust is created through instruction in the last will and testament after the death of the testator (i.e., the willmaker).

For families with one or more members with special needs, a special needs trust allows assets to be held to benefit this family member without jeopardizing eligibility for means-tested government benefits.

Marital trusts are for couples who want to benefit the surviving spouse while taking advantage of tax benefits.

What is Involved in Establishing a Family Trust?

Several steps must be taken to set up a family trust.

You must first choose the best type of trust to meet your needs.

You must then draft the trust agreement and terms with an experienced estate planning attorney.

After the trust has been created, you should transfer assets to fund the trust.

Working with an estate planning attorney admitted to practice in Kansas or Missouri will be necessary for residents of these states.

What are the Benefits of a Family Trust?

Establishing a family trust can help protect assets from legal judgments and creditors by reducing gift and estate taxes, providing greater asset management and distribution control, and bypassing probate court proceedings.

What Parties are Involved in a Family Trust?

The first party involved is the settlor or the grantor.

This individual is the person who creates the trust and funds the trust through asset transfers.

The second part is the trustee.

This individual follows the terms of the trust to manage trust assets.

With a revocable trust, the settlor can serve as the trustee while alive.

With an irrevocable trust, a separate individual or corporation must serve as the trustee.

The third party is the beneficiary of the trust, benefitting from the trust and its terms.

Are Revocable Trusts or Irrevocable Trusts Better?

The answer to this question depends upon your specific circumstances and goals.

A revocable trust would be best if flexibility is more important than creditor protection.

An irrevocable trust would suit you better if your family trust requires tax benefits and asset protection rather than flexibility.

Is a Trust Better Than a Will?

While they have some overlap in their roles in estate planning, these documents have distinct purposes.

Trusts are used to manage assets during your lifetime and distribute them after you have died.

Wills are only functional for controlling the fate and distribution of assets after the testator has died.

What are the Differences Between a Family Trust and Other Trusts?

Family trusts are a subcategory of trusts.

They exist to benefit family members.

Other trusts may be created to benefit others outside of the family.

One common example is a charitable trust.

This trust is designed to benefit a charity or the general public.

Creating Your Family Trust Requires Thoughtful Care.

Before creating a family trust, you should understand your current financial situation and goals.

Both are necessary for developing a thoughtful plan to protect assets and support your family for generations.

While family trusts provide tax advantages, asset protection, and greater control over asset distributions, these benefits vary by trust type.

When choosing between revocable or irrevocable trusts, you must clearly understand your goals and the purpose of the trust you wish to create for your family.

Working with an experienced estate planning attorney will enable you to set up a comprehensive estate plan and family trust to suit your family's needs.

This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between the Law Offices of Kyle E. Krull, P.A., and the reader.