Inherited Family Trust? What Do I Do With It?

September 11, 2023

When you inherit a family trust, it's essential to understand exactly what you're getting and what you need to do with it. This blog will discuss the different ways they can be used, and outline the steps you need to take to make the most of them. We hope by the end of this blog, you'll understand what inheritance through a family trust entails and what your next steps should be. 

Pay off a debt

A family trust may be used to satisfy an unpaid obligation that is not backed by assets. This implies that the trust can help to cover the debt and keep assets safe from creditors. However, first, it's best to determine where the debt began originally. If the debt was incurred before to the foundation of the trust, creditors may be able to seize assets to satisfy the obligation through probate. Nonetheless, you should speak with an attorney to see if this option is offered to you and if it is the most appropriate course of action for you.

Investment purpose

You can invest your inherited trust for future financial gain. However, discussing your trust alternatives with a financial counselor is always a good idea. This entails shifting the trust's assets into separate accounts under your supervision for use as appropriate. This enables you to benefit from compound interest over time, which can result in considerable gains in your financial assets. Additionally, depending on how the trusts are set up, this kind of investment could be tax-advantageous. Additionally, moving part or all of the assets into an IRA may provide other advantages, including access to investments and company matching contributions.

Real estate

Investing in real estate can be a great way to get into the market and increase your net worth over time. There are several benefits to investing in this asset class, including increased liquidity and potential for capital gains. In addition, investing your inheritance into real estate can be a great way to secure your future and provide you with long-term financial stability. Real estate has historically been a good investment because it is built to last; sentimental value isn't as important when buying or selling property compared to stocks and other assets. Moreover, since real estate tends to be a long-term investment, trust holders may also benefit from appreciation over time. 

Retirement

Trust assets can be placed into individual retirement accounts or qualified plan accounts to help fund a comfortable retirement. Trustee income may also be taxed at the owner's tax rate depending on the type of trust and its specific terms. To maximize tax benefits from trust assets in Retirement planning, it is essential to consult with a financial advisor who will guide you through your options and answer any questions about how inheritance could impact your long-term savings goals.

How to get started having received an inherited family trust?

When it comes to receiving an inherited family trust, there are a few things that you will need to consider. The first thing is to contact your estate attorney or legal representatives who can help you with the formalities of transferring ownership of the trust assets into your name. They can also guide how best to use and manage these assets while ensuring they remain primarily invested by the terms of the trust.

After this initial step has been completed, meeting with a financial planner knowledgeable about trusts and Inherited Property Taxes (IPT) is essential. Your financial planner can help review your holdings, calculate associated taxes, and recommend strategies for minimizing such costs. Additionally, they may be able to provide advice on trustee selection and management and investment opportunities within the trust portfolio.

An inherited family trust can be a beneficial way to distribute your wealth while maintaining control over it. In addition, inherited trust can be a valuable financial planning tool, but knowing what to do with it is essential. For example, a trust can help you to pay off a debt, protect assets from probate, and make estate planning more manageable. If you're unsure how to proceed, consult a professional who can help you create and manage an inheritance trust.

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