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You can establish a trust fund for your children or grandchildren and primarily, you put the money in a fund so that your children or grandchildren can get it after they reach a certain age. You are not in control of the assets in the fund. The assets in the fund are controlled by a trustee and you would be referred to as a donor or grantor. The trustee is legally responsible for managing and executing the fund.
The main reason that people establish trust funds is to separate the benefits of property ownership into current and future ownership. Trust funds are usually designed in such a way that the benefits first pass on to the surviving spouse, then to the children and grandchildren.
One of the reasons that people establish trust fund is that it offers income tax exemptions to the donor. A certain amount of money can be put into the fund annually for which you get income tax exemption. In addition, the fund also reduces estate taxes after the donor passes away. The fund also allows you to ensure that your assets are supervised if you are unable to personally oversee the assets. In addition, the fund allows you to transfer your assets to the beneficiaries upon your demise. There is also gift tax advantage to using a trust fund.
People who get money from trust funds have to add the income to their annual income and this makes it taxable. However, if a fund is structured in a correct way, it may help to reduce the capital gains tax. In order to figure out how you can benefit from trust fund income tax exemption, you should contact your fund trustee and an experience lawyer to advice you.
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