WHEN FOLKS HEAR that someone has set up a trust or is the beneficiary of a trust, one thought often comes to mind: We’re talking about serious money. In the lexicon of wealth, the term “trust” is as evocative as “hedge fund,” “private equity” and “overseas bank account.”
In truth, a trust is just an estate planning tool, one that sometimes makes sense even for families with relatively limited wealth. Why would you use this tool? There are four reasons:
Depending on the type of trust, hefty costs can be involved. This shouldn’t be an issue with, say, a revocable living trust used simply to avoid probate. But let’s say you bequeath money to your children in a trust. The trust could pay substantial annual fees for administration and money management, and also need to file its own tax return.
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