Bare Trust

Filed Under » ,
Dictionary Says

Definition of 'Bare Trust'

A basic trust in which the beneficiary has the absolute right to the capital and assets within the trust, as well as the income generated from these assets. Bare trusts are widely used by parents and grandparents to transfer assets to their children or grandchildren.Trust assets are held in the name of a trustee, who has the responsibility of managing the trust assets in a prudent manner so as to generate maximum benefit for the beneficiaries. The trustee has no control over these assets and has no say or discretion in directing the trust's income or capital. Also known as a simple trust.

Investopedia Says

Investopedia explains 'Bare Trust'

Income generated from trust assets in the form of interest, dividends and rent is taxed in the hands of the beneficiary, making it a tax-efficient way of transferring assets to one's descendants. There is no tax implication for the individual who sets up a bare trust, since he or she gives up legal title to the assets when they are transferred to the trust.

One negative feature of a bare trust is that the beneficiaries cannot be changed once it has been set up. Another drawback is that there may be potential capital gains and inheritance tax implications in certain jurisdictions.

Articles Of Interest

  1. Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  2. Three Documents You Shouldn't Do Without

    Estate planning is not just about the division of assets after you die. Read on to save your loved ones extra grief.
  3. An Estate Planning Must: Update Your Beneficiaries

    Life changes make it time to rewrite your plan's designations.
  4. Get Ready For The Estate Tax Phase-Out

    Changes to federal legislation will affect how your assets are treated once you're gone - be prepared.
  5. Your Will: Why You Need A Power Of Attorney And Beneficiaries

    What would happen if you were suddenly unable to manage your financial affairs? Preparation is the best protection.
  6. Skipping-Out on Probate Costs

    Don't let bad estate planning lead to unnecessary costs and stress for your inheritors.
  7. How do I list the beneficiaries of my life insurance policies if I have a trust?

    Because most states protect life insurance policies from creditors, most buyer questions come from the confusion created with ownership and beneficiary designations because of tax treatment. ...
  8. 3 Financial Tasks We Think Are Harder Than They Really Are

    Use these three tips to help put your financial situation into perspective. It turns out, organizing your finances isn't nearly as hard as you thought.
  9. Certifications For Estate Planning

    These certifications can lead to a promising career, but is estate planning for you?
  10. Why You Shouldn't Die In 2013

    Increases in estate tax rates and possible fiscal cliff implications will make things more difficult when it comes to arrangements for your death.
comments powered by Disqus
Marketplace
Hot Definitions
  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...
  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.
  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.
  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.
  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center