To Serve as a Family and/or Financial Planning Tool

The Primary Reasons to Use a Trust and Financial Advisor

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Question

To server as family and/or financial planning tool

To provide for retirement -

To obtain favorable tax treatment

These are the primary reasons -

Answers

Explanations

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A. B. C. D.

A

The primary reasons listed - to serve as a family and/or financial planning tool, to provide for retirement, and to obtain favorable tax treatment - are all related to the establishment of a trust, making answer choice A correct.

Establishing a trust is a legal arrangement where assets are transferred from the original owner (the grantor) to a trustee, who manages and distributes the assets to beneficiaries according to the terms of the trust document. Trusts can be used for a variety of purposes, including those listed in the question.

  1. To serve as a family and/or financial planning tool: Trusts can be an effective tool for managing and distributing assets for future generations. A trust can ensure that assets are distributed according to the wishes of the grantor, and can provide for specific needs such as education expenses or healthcare costs. Trusts can also protect assets from creditors and other legal claims.

  2. To provide for retirement: Trusts can also be used to provide for retirement income. A grantor can establish a trust that provides regular payments to the grantor or another beneficiary during their retirement years. The trust can be set up to ensure that income is available for a specified period of time or for the lifetime of the beneficiary.

  3. To obtain favorable tax treatment: Trusts can also be used to obtain favorable tax treatment. Depending on the type of trust established, assets transferred to the trust can be exempt from estate taxes, gift taxes, or income taxes. This can help to preserve wealth and minimize tax liabilities.

Answer choices B and C are not correct because they do not relate to the reasons listed in the question. Naming an institution as trustee or safekeeping assets may be part of establishing a trust, but they do not address the primary reasons for doing so. Answer choice D, custodial, refers to the act of holding assets on behalf of someone else, but it does not specifically relate to the establishment of a trust.

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