We've all heard of trust fund babies. 🍼 💰 They're the ones who blow mommy and daddy's money on trips to the Fyre Festival and buy Birkin bags out of boredom. 👜 But when it comes to retirement trust accounts, it turns out they're not just for the rich and shameless!
A trust can help you protect your estate while also giving you some pretty decent tax benefits. 😎
Here’s Five Fast Facts on retirement trusts and how to set one up:
- 💵 Trust Me, Bro - A trust is an official financial arrangement where you (the grantor) gives a person, called a trustee, the right to take care of your property or assets on behalf of your beneficiaries. In other words, your trust is an account that's handled by a middleman between you and whoever you're leaving money to.
- ⛑️ Protect Your Pennies - While you can definitely leave your cash and assets directly to your beneficiaries when you pass, putting them in a trust offers additional protection. For example, you can set up rules in your trust to help protect your assets from creditors or to protect your financial legacy from a beneficiary who's not so great with money.
- 🙅🏽♂️ No Take Backs - Trusts are either revocable or irrevocable, which are some pretty fancy words, so let's simplify it. In a revocable trust, also known as a living trust, you can still maintain control of your assets while you're still alive. You can make as many changes to a revocable trust as you want, but it becomes irrevocable once you pass away. An irrevocable trust cannot be changed once it's set up. Most people pick an irrevocable trust if their main goal is to protect their assets from Uncle Sam.
- 🏠 Gimme Shelter - When set up correctly, assets in an irrevocable trust can be sheltered from estate taxes. You can also make annual contributions to the trust tax-free as long as they're under the current gift limits. For 2023, the limit is $17,000.
- 🤓 Stop It, Get Some Help - Trusts seem like they're way more complicated than they are. However, each state has specific rules regarding trusts, so it's best to talk to an attorney to get everything together. A lawyer will also help you draw up the terms of your trust exactly the way you want them.
🔥Bottom line: We've all got trust issues, but setting up a trust shouldn't be one of them! Set up a meeting with your local attorney or financial advisor to see if a trust is right for your financial situation. If you need more mentorship around all things financial, check out this article.
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