Trusts are estate planning tools

Contrary to popular belief, trusts aren’t only for the wealthy

Trust funds can be expensive to set up, given that their establishment often requires paying a lawyer for their time. But for many, that expense might be worth it depending on the complexity of the assets and the ability to specify when, where or how an estate’s assets are used.

Trusts offer ways to reduce the taxes beneficiaries pay on assets in one’s estate

People of different socioeconomic classes often decide to establish a trust to avoid certain taxes. When someone dies and leaves assets to beneficiaries in a will, those beneficiaries must pay specific taxes a trust's beneficiaries avoid. It all depends on the type of trust.

Both individuals and businesses can establish trusts

Business trusts can allow trustees to manage a beneficiary’s stake in a business, and more. There are many different specific types of business trusts.

Revocable trusts are typically subject to estate taxes

Irrevocable trusts, however, are not. Both types help beneficiaries avoid probate, the lengthy court process that administers a person’s estate upon death.

Special needs trusts help financially care for dependents with disabilities.

Certain trusts can bypass estate taxes—but the terms can't be changed

Putting money and other financial assets in an irrevocable trust is one way to avoid estate taxes. There are some cons to this trust, like the fact that you can't change the terms of the trust or assets in the trust after they're set. But a big pro is that any financial assets in an irrevocable trust aren't considered part of your estate, meaning they aren't subject to death taxes.

It’s not always clear whether a will or a trust is the best for an individual estate

While trusts are typically more expensive to set up than a will, they also help beneficiaries avoid specific types of taxes, depending on the type of trust. Wills typically go through probate, whereas trusts do not. An article offers a list of questions to consider when deciding between the two.

Explore a visual of 16 different types of trusts

While all trusts fit into one of two categories (revocable or irrevocable), many other types of trusts exist for more specific circumstances. Think: pet trusts and special needs trusts.

In a trust, the trustee is often the same person as the beneficiary

While a trustee is supposed to be a neutral third party whom the grantor appoints to manage their trust, they can be (and often are) the same person as the beneficiary. While that seems counterintuitive, trustees have a legal obligation to manage assets impartially and in the trust’s best interest.

The median trust fund contains roughly $285K

That’s according to data from the US Federal Reserve. There isn’t a specific net worth that can help determine whether or not someone needs a trust—but contrary to popular belief, trust funds can be great estate planning tools, even for people who aren’t ultra-wealthy.

A revocable living trust is the most common type of trust

With a revocable trust, the grantor can alter or dissolve the trust at any time. A living trust, is one that the grantor creates during their lifetime (as compared to a “testamentary” trust, which a grantor establishes in their will to be read after death).

Revocable trusts are more flexible than irrevocable trusts

Irrevocable trusts are almost impossible for the grantor to change or dissolve. With a revocable trust, the grantor can alter or dissolve the trust at any time. However, there are upsides to irrevocable trusts, too—such as the fact that they’re typically not subject to estate taxes, unlike revocable trusts.

Learn how to set up a trust

Setting up a trust often costs at least a few thousand dollars, given that the process typically requires paying for a lawyer’s time. An article lays out the step-by-step process one should follow in order to set a trust up.

Probate is a legal process that determines if someone’s will is valid

The executor of the will in question not only collects estate assets, but also pays outstanding taxes and more. Grantors sometimes opt for a revocable trust instead of a will so their assets avoid probate in the event of their death.

A growing number of Americans are leaving trust funds behind for their pets

A pet trust ensures that an animal receives financial support and care if its owner can no longer care for the pet. Some lucky dogs have inherited millions of dollars from their owners.

Real estate investment trusts help give portfolios more exposure to real estate

Also known as a REIT, a real estate investment trust is a type of company that invests in a portfolio of real estate, such as apartment buildings or malls. Investors can buy shares of the REIT to participate in its portfolio’s gains and losses.

Estate planning involves organizing your financial documents—and making sure your family knows where to find them

This article offers tips for keeping yourself organized, such as the list of documents your family may need and suggestions for where to keep the files, both digital and physical.

Death taxes are placed on a deceased person's estate

Death taxes can include liquid cash, property, stocks, or other financial assets they owned. There are two main types of death taxes in the US: the estate tax and inheritance tax. Death taxes are levied at the federal and state level, but are targeted towards the rich.

Half of the richest people in the US are finding ways around death taxes

One of the main purposes of the federal estate tax is to crack down on generational wealth, so wealth isn't concentrated among a select few. However, the ultra-rich have found ways around paying these taxes. This ProPublica article investigates the practices used by half of the 100 richest people in the US to avoid death taxes.

Estate taxes are paid out of the estate, while inheritance taxes are paid by beneficiaries

When a person dies, any estate taxes owed are paid out of their finances before being transferred to their beneficiaries—unlike inheritance taxes that are paid by the beneficiaries themselves. In addition to a federal estate tax, 12 states and the District of Columbia have a state estate tax with varying rates.

Explore a guide to 529 college savings plans

Investors put after-tax dollars into these education-earmarked accounts, and like a 401(k) or IRA, they invest them into stocks, bonds, or funds. When it comes time to withdraw, investors do not pay any taxes on distributions. However, the money must be used for approved expenses like college tuition, textbooks, and trade schools.

The pros of exchange-traded funds include ease of access through brokerage apps and retirement savings accounts

One unexpected perk is that ETFs are typically associated with lower capital gains tax requirements. Read this list to learn more about the benefits of investing in ETFs.

How the wealthy are preparing for an estate tax clip

In 2017, the federal government passed a tax bill that raised the estate tax threshold for individuals and married couples. However, this exemption was temporary and is set to expire at the end of 2025. This Bloomberg Tax podcast episode explains what wealthy individuals are doing to protect their estates before the tax change. Listen here.

Alternative investments carry unique tax implications

The specifics depend on the type of alternative asset, as well as how long you hold it for, and your income.

Pension plans investing over 60% in stocks had the highest real returns in 2024

In order to ensure that retirees received all the retirement funds a company or other institution may have promised them, pensions were often limited to investing in run-of-the-mill assets like government securities, investment-grade bonds, and blue-chip stocks. But as market conditions have evolved, pensions are increasingly being invested in a wider range of assets, including alternative investments.

Alternative investments can include everything from cryptocurrency to fine art

The financial assets typically fall outside the scope of traditional investments like stocks and bonds, and they’re often intended to diversify investor portfolios.

The debate over estate taxes centers on wealth inequality

Since the modern federal estate tax was implemented, people have felt strongly about whether or not to keep it. Much of the debate boils down to equality: Proponents say the tax creates better income equality between the rich and poor, while opponents say it's an inequitable tax only placed on the wealthy.

Gifting money is one way to avoid death taxes

Gifting money while you're alive is one way people avoid estate and inheritance taxes. There is a yearly cap on how much you can give to a person before that money is taxed—but there isn't a cap on how many people you can give money to in a year.

A 401(k) plan allows workers to save for retirement without paying taxes until later

With a 401(k) plans you can invest more money now and let it grow with compound interest. Americans have more than $7T invested in these types of accounts.

Smart tips for making the most of your 401(k)

There’s a lot of advice about handling a 401(k), but it can be mired in disclaimers and legalese. Come prepared to your financial advisor or accountant by watching this informative take on how to properly use a 401(k), from consolidating plans to some of the most common errors.

Roughly 90% of generational wealth dries up by the third generation, epitomized by the phrase 'shirtsleeves to shirtsleeves in three generations.'

HSAs are triple-tax advantaged—offering tax-free contributions, investments, and withdrawals

One of the reasons HSAs are so popular is the plan's triple-tax advantage. All contributions to an HSA happen pretax, funds in the HSA can be invested in stocks, bonds, or exchange-traded funds, and withdrawals to cover medical expenses are tax-free.

ETFs and mutual funds are both taxed on capital gains and on dividends.

Owning a home can help build wealth via tax benefits and more

In addition to tax benefits and the potential to build equity in your home, houses are also typically considered an appreciating asset. That means their value is likely to increase over time.

'Trust is one of the greatest economic forces on earth' - Charlie Munger

Different types of endowments, explained

​This Investopedia article provides a comprehensive overview of financial endowments—donations made to nonprofit institutions like universities, museums, or hospitals. It explains how endowments are structured, the various types (such as restricted and quasi-endowments), and how they are managed to support an institution's mission over time.

Asset location is the type of account an asset is placed in

Investors are likely familiar with “asset allocation,” creating an ideal mix of different asset types in an individual's portfolio. But asset location matters just as much for investors who are conscious of how much they owe in capital gains taxes.

Americans are projected to inherit $105T over the next 30 years

Today, someone's financial standing has more to do with their families than any other outside factor. Of the more than $100T of projected inheritance, that money is concentrated among a few wealthy estates and families.

Three ways to save for your child’s future

Parents can open a custodial Roth IRA when their child starts to earn income (think: summer job), which can help them start saving early. For example, 529 accounts help parents save for college, while UTMA/UGMA accounts function like trusts.

How much tax you would owe on a $14M inheritance

“Death taxes” refer to estate and inheritance taxes—fees imposed on wealth transfers after someone passes. While the federal estate tax only applies to estates over $13.61 million in 2024, some states, like Washington, have their own taxes.

401(k) plans and pensions differ in who has control over the investments

With pension plans, a company contributes to an investment fund from which it distributes regular payments to a retired worker until their death. A 401(k) gives the worker control over contributions in a tax-advantaged account.

An individual retirement account is a type of tax-advantaged investment account

An IRA lets individuals at most income levels invest either pre- or post-tax money for retirement. IRAs are often good solutions for people who don’t have the option to invest in a 401(k) plan—or for those who want to put even more money aside for retirement.

Mutual fund investors typically must pay a variety of different types of taxes associated with their investment, unless the funds are within tax-advantaged accounts like a 401(k) or IRA.

Alternative investments can be sorted into seven major categories, according to some experts

These categories include real estate, private equity, private debt, hedge funds, collectibles, and more.

7 things to know about inherited IRA rules

An inherited IRA is any kind of IRA or 401K plan you inherited from someone after they’ve died. Since there are different tax advantages for each type of retirement account, the rules you have to follow widely differ based on the account, your relationship to the deceased, and how you want to use the money. Here are the seven things you must know to navigate an inherited IRA.

More than half of today's family offices—the private companies that help ultrawealthy individuals manage their fortunes—were incorporated after 2010.

The scope of 529 plans has expanded, but 529s still have some drawbacks

The tax-advantaged accounts can be used to pay for K-12 education, apprenticeship programs, and student loans, in addition to their original purpose: paying for college. But 529s have downsides, such as fees and penalties for non-qualified uses.

The prevalence of 401(k) plans and IRAs over pensions shifted investment risk from employers to employees.

People often invest in alternative investments to diversify their portfolios

Because alternatives often have little correlation with traditional investments like stocks and bonds, adding them to a traditional portfolio can reduce its overall risk exposure.

Five mistakes experts see people make with 529 plans

In this podcast, financial experts review the top five mistakes investors make when it comes to this education investment vehicle. Some mistakes are true for all investments, such as periodically checking for new rules and regulations. Others focus on 529 plans and how to get the most out of them.