Trusts are used for several purposes: estate planning, tax planning, medical planning, and charitable giving. Trusts are also quite popular, largely because they are very flexible tools with many potential benefits. One of the more notable benefits is the ability to make gifts to multiple beneficiaries in such a way that you minimize gift and estate taxes. The annual gift tax exclusion of $15,000 allows those who use trusts to transfer substantial funds without needing to pay gift and estate taxes. But with all these benefits, is there a limit on how much money can be placed in a trust? Keep reading to find out, and for all questions regarding trusts and estate, please be sure to reach out to a Hartford County probate attorney who will help you make the best possible financial decisions
What Is a Trust?
To begin, let’s examine what a trust is. A trust is a document that gives you, another person, or an institution to keep your money, either for your benefit or for the benefit of someone else. Trusts are made just like wills, via a written document. And like wills, trusts let you manage your assets in life and after death.
When someone sets up a trust, they are considered the grantor or the settlor. Whoever manages the trust is the trustee, and that may be either yourself or someone else. The individual receiving money and/or property through the trust is the beneficiary. Finally, the money and property within the trust are called the trust assets.
Requirements and Limitations
Although trusts are typically associated with the wealthy, anyone at any level of income can create a trust. It would be most advisable to only do so if you have notable assets to protect. Trusts have a minimum amount of $100 that you must deposit. It can vastly help to have a lawyer guiding you as you document the trust.
This, however, will likely cost over $1,000, in addition to the fees associated with setting up a trust. For this reason, it’s more common for people with $100,000 or more, and perhaps with real estate besides, to form trusts. Nevertheless, nothing is stopping you from starting a trust with less.
Similarly, there is no maximum limit on how much you can deposit in a trust fund. In fact, trust funds are particularly useful in cases where an individual’s assets are otherwise under a limit. For instance, a special needs trust or an SNT allows the grantor to set aside assets for the beneficiary in cases of individuals with severe or chronic disability who have needs-based government benefits, like Medicaid or Supplemental Security Income. The beneficiary of the SNT doesn’t own the assets, and as such, they are still eligible for benefits that have an asset limit.