Tom Cruise sets a trust fund for Suri and how you can do it for your children too!

 

Tom Cruise is reportedly setting up a trust fund for daughter Suri as part of his divorce settlement with ex-wife Katie Holmes. 

The settlement outlined that Holmes will receive $ 400,000 a year in child support for the six-year-old until she turns 18, but the actress reportedly also negotiated for a sizeable trust fund to be set up in Suri’s name.

Holmes negotiated the trust fund so that her daughter will be able to begin to access some of the funds once she turns 18 years old.  

 “She just wanted to ensure that Suri would have financial security as she becomes an adult. It’s a sizeable trust fund, but Suri won’t be able to fully legally claim it until she is in her 30s. Tom had no problem with the request and planned on doing it for Suri anyway,” said the source.


What is a trust fund? Do you need to be as rich as Tom Cruise to have one?


If you've heard of trust funds but don't know what they are or how they work, you're not alone. For a large amount of people, they may know one key fact about trust funds: They're set up by the ultra-wealthy as a way to give to their family, friends or entities after they pass away. But only part of the conventional wisdom is true. Trust funds are designed to allow a person's money to continue to be useful well after they pass away, but trusts aren't only reserved for ultra-high net worth individuals like Tom Cruise. Middle class citizens have the ability to set up trust funds too.

What Is a Trust Fund?To understand how a trust fund works, let's look at an example. You've worked hard all of your life and built up a comfortable savings cushion. You know that sometime in the future you're going to pass away, and you want your hard-earned savings to go to the people you love, or the charities or causes that you believe in.

Now, what about loved ones who are not as financially savvy as you? You could be concerned about leaving them a lump sum gift because they might use it irresponsibly. Furthermore, you may even like to see your money carry over for generations to come. If this is how you feel, then you should set up a living irrevocable trust fund. This type of trust can be set up to begin dispersing funds when certain conditions are met. There is no stipulation that you cannot be alive when that happens.

You can place cash, stock, real estate, life insurance or other valuable assets in your trust. You meet with an attorney and decide on the beneficiaries and set stipulations. Maybe you say that the beneficiaries receive a monthly payment, can only use the funds for education expenses, expenses due to an injury or disability, or the purchase of a first home. It's your money so you get to decide.

Because it's irrevocable, you don't have the option of later dissolving the trust fund. Once you place assets in the trust, they are no longer yours. They are under the care of a trustee. A trustee is a bank, attorney or other entity set up for this purpose.

Since the assets are no longer yours, you don't have to pay income tax on any money made from the assets. Also, with proper planning, the assets can be exempt from estate and gift taxes. These tax exemptions are a primary reason that some people set up an irrevocable trust. If you, the trustor (the person setting up the trust) is in a higher income tax bracket, setting up the irrevocable trust allows you to remove these assets from your net worth and move in to a lower tax bracket.

 

If you have questions please contact us at 813-94-7100 or visit our website:www.MintcoFinancial.com

 

Mintco Financial has a team of specialists to put you and your family in the right direction regarding Asset Protection and Estate Planning.