Trusts can be a powerful tool to have in your financial tool box. They can be a resource to help you build your financial wealth if you learn how and when to use them.
The first step is to understand the two main categories of trusts, revocable and irrevocable. When you use them, think of it as pulling a hand tool versus a power tool from your toolbox.
For example, a revocable trust is similar to a hand tool, relatively easy to set up and use. It is easier to administer and relatively inexpensive. A revocable trust can be changed easily and offers some asset protection.
A common way to use a revocable trust is a Land Trust which can hold investment properties and personal homes. Another common use is a Personal Property Trust which holds cars, boats and even notes. A living trust, used mostly for estate planning, can hold your personal home, assets, stocks and bank accounts.
An irrevocable trust is similar to a power tool because it is a little more complex to set up and operate. There are more rules to follow. It can cost more and can be permanent but it offers much better asset and privacy protection.
Common ways to use an irrevocable trust are an Asset Protection Trust and a Children’s or Special Needs Trust which can provide income for minors or people with special needs.
Another powerful way to use an irrevocable trust is an Installment Sale Trust which can help you defer taxes when selling assets or businesses.
When building a house, the right tools make it easier to get the job done. The same is true for your financial house. Knowing about the right tools can help you reach your financial goals. Build your financial tool box by learning about trusts. Then, you can always reach for the tool you need.
Todd VanMeter has been building homes, rental portfolios and using trusts for over 35 years. He also teaches real estate and financial strategies. Todd@BlueHatWealth.com.
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