Funding Trusts
Funding Trusts
Starlight Financial is here to help you navigate funding trusts.
A trust is a property managed by one person for the benefit of another. If you are looking to set up or fund a trust, Starlight Financial can help. Our skilled advisors can walk you through the different types of trusts and how they are funded, so you can decide which is best for you.
Special Needs Trusts are designed to benefit individuals who are mentally ill or disabled, because they often lack the mental ability to handle their own finances. These trust funds are usually run by eligible family members and are designed to ensure that the beneficiary does not lose any government benefits that they have been receiving. Unlike an inheritance paid out through a will, trust assets do not disqualify individuals from government programs like Medicaid, because the beneficiary does not have control over the assets. The trustee, or person in charge of the trust, can use the money in the trust to purchase things for the individual, rather than giving them the money, which could disqualify them from government programs.
Irrevocable Life Insurance Trusts help protect your family from estate tax after you are gone. These are created for purchasing life insurance, so your family won’t have to pay taxes on it. However, you cannot own the trust and serve as its trustee, because it will be considered part of your assets and can therefore be taxed. However, your spouse, child, or even an attorney can act as the trustee for you. While most states’ estate tax thresholds are pretty high, some states do impose estate tax on lower values, so these trusts can help avoid those taxes. When you die, the death benefit of your insurance policy is used for funding trusts, which can then be used to take care of your beneficiaries. This gives your beneficiaries steady payments instead of one lump sum.
You can also designate a
trust as a beneficiary of your IRA. What this means is that you can decide how the contents of your IRA will be distributed, and they will be put into a trust once you die. This trust ensures that your beneficiaries will get steady payments, rather than one big lump sum upon your death. If you have a beneficiary you are concerned will not wisely use their inheritance, this is a good way to make sure they are cared for over a longer period of time. You can also use this if you have children from a previous marriage you want to protect. However, there can be issues with declaring a trust as your beneficiary, so it is important to consult an expert before doing so.
At Starlight Financial, our expert advisors want to help you make the most out of your money and make sure your family is protected after you’re gone. We currently have locations in Kingsport, TN, Fredericksburg, VA, Linton, IN, the Louisville/New Albany area, Florence, Lexington, and Pikeville, KY, and Phoenix, AZ. We proudly serve the surrounding areas, and soon, we will also have a location in southern Illinois.