Wealth is not a requirement for asset protection

There are a few things required to justify creating an asset protection plan. Contrary to what most people think, being as rich as a Rockefeller is not one of them. More important is to appreciate that life is about more than the here and now. If you are married, with or without children, you can make creating an inheritable legacy through various legal tools part of a comprehensive estate plan. If you are single, a trust could help cover your financial needs in old age.

Specific to trusts, because of the legal ins and outs, you want to be clear on the reason for setting one up. This is best done with an experienced attorney. Once you have a reason, you will want to explore all options. And while some trust providers set an out-of-reach minimum amount to create a trust, there are some that can be set up for just a few hundred dollars and then bolstered with regular contributions over time. Obviously, the earlier you start the process, the better the trust’s funds will be.

What a trust fund is

One of the main objectives in creating a trust is to be sure that money in it works for the named beneficiaries. That could be you. It could be heirs after your die. A key feature is the control the creator maintains. For example, with a living irrevocable trust fund, source funding can be cash, stocks, real property or any other assets of value. The creator sets the terms and conditions for disbursing the money and in what amounts.

Its irrevocable nature means you don’t own the assets anymore. The funds are managed by a bank, attorney or other designated trustee. Because you don’t control the assets, you face no income tax obligation. There is another form of irrevocable trust that makes it possible to fund a child’s college education. And because the assets aren’t owned by the child, it doesn’t count as resources that could affect obtaining financial aid. Other fees may attach, however, so it’s important to get full details before making any decisions.

The thing to take away is that high net-worth is not the key basis for creating a trust. What’s important is having a long view of potential need and finding a way to make that vision real in the most effective way possible.

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