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At Fleming Financial Services, Inc., our role is to assist our clients in defining and realizing their financial objectives and goals. We work with our clients to implement personalized plans designed for their unique situations. Our areas of concentration are: Retirement planning, Estate and Wealth Transfer strategies, and Business Continuation planning. We emphasize the importance of conducting our business with integrity and professionalism. As a member of PartnersFinancial, an independent national financial services company, we are able to provide access to sophisticated resources for the benefit of our clients. Some of the professionals with our firm are currently registered to conduct business through NFP Securities, Inc. With those additional resources in place, we help facilitate the complex corporate and personal financial decisions our clients must make.
Trust Basics - Part 1
Fleming Financial Services, PA, Trust BasicsWhether you're seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility--many types of trusts exist, each designed for a specific purpose. Although trust law is complex and establishing a trust requires the services of an experienced attorney, mastering the basics isn't hard. What is a trust? A trust is a legal entity that holds assets for the benefit of another. Basically, it's like a container that holds money or property for somebody else. There are three parties in a trust arrangement:
  • The grantor (also called a settlor or trustor):  The person(s) who creates and funds the trust
  • The beneficiary: The person(s) who receives benefits from the trust, such as income or the right to use a home, and has what is called equitable title to trust property
  • The trustee: The person(s) who holds legal title to trust property, administers the trust, and has a duty to act in the best interest of the beneficiary
You create a trust by executing a legal document called a trust agreement. The trust agreement names the beneficiary and trustee, and contains instructions about what benefits the beneficiary will receive, what the trustee's duties are, and when the trust will end, among other things. Funding a trust You can put almost any kind of asset in a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. The assets you choose to put in a trust will depend largely on your goals. For example, if you want the trust to generate income, you should put income-producing assets, such as bonds, in your trust. Or, if you want your trust to create a fund that can be used to pay estate taxes or provide for your family at your death, you might fund the trust with a life insurance policy. Potential trust advantages:
  • Minimize estate taxes
  • Shield assets from potential creditors
  • Avoid the expense and delay of probate
  • Preserve assets for your children until they are grown (in case you should die while they are still minors)
  • Create a pool of investments that can be managed by professional money managers
  • Set up a fund for your own support in the event of incapacity
  • Shift part of your income tax burden to beneficiaries in lower tax brackets
  • Provide benefits for charity
Potential trust disadvantages
  • There are costs associated with setting up and maintaining a trust, which may include trustee fees, professional fees, and filing fees
  • Depending on the type of trust you choose, you may give up some control over the assets in the trust
  • Maintaining the trust and complying with recording and notice requirements can take considerable time
  • Income generated by trust assets and not distributed to trust beneficiaries may be taxed at a higher income tax rate than your individual rate
©2013 Broadridge Investor Communication Solutions, Inc. All rights reserved.
Thomas Joseph
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Categories: Consultation
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