What Do I Really Need to Know About Trusts?
Living Trust

What Do I Really Need to Know About Trusts?

A trust is an agreement between two parties, the settlor and a trustee. They may be used for many purposes nut all of them require the trustee to accept, manage and protect assets delivered by the trustmaker, administer those assets according to the trustmaker’s instructions, and distribute the income and principal only for the benefit of those that are named.

Kiplinger’s article “Trusts 101: Why Have a Trust?” explains that the trustee is a fiduciary and must act with reasonable care in administering the trust and selecting trust investments. She also must avoid any conflict of interest or self-dealing in holding, purchasing and selling trust assets, and diligently avoid breaching any of the trustee’s duties to the settlor and beneficiaries.

The trustee must follow the trustmaker’s terms. She must also be wise in making investment and administrative decisions and be objective and transparent.

Trusts can be created for several reasons, such as the following:

  • To oversee spending and investments to protect beneficiaries from poor decisions;
  • To avoid court-supervised probate of assets;
  • To allow for privacy;
  • To shield assets from the beneficiaries’ creditors;
  • To keep premarital assets from a division of assets between divorcing spouses;
  • To earmark funds to support the settlor, when incapacitated;
  • To manage unique assets that aren’t easily divisible, such as a vacation home or a pet;
  • To manage closely held business assets for planned business succession;
  • To hold life insurance policies, pay premiums and collect the tax-free proceeds to care for beneficiaries, fund closely held stock redemptions or purchases and provide liquidity to the estate;
  • To provide structured income to a surviving spouse that shields trust assets for descendants, if the spouse remarries; and
  • To decrease the amount of income taxes or to shelter assets from estate and transfer taxes.

A trust can be set up to achieve specific goals and give tools for the trustee to balance those goals with investment and economic factors.

The most common type is a revocable living trust. It’s usually not funded until your death. It will include your instructions for how you want your estate divided among your beneficiaries and how each person’s share is managed, administered and distributed. They are flexible, so that as children grow into adulthood, you may make changes to reflect life events.

Talk with an estate planning attorney and create your estate plan with a will and a trust.

Learn about the many benefits of a revocable living trust.

Reference: Kiplinger (June 11. 2019) “Trusts 101: Why Have a Trust?”

Does Good Estate Planning Prevent Family Fights over Personal Items?
Good Estate Planning Prevents Fights Over Personal Items

Does Good Estate Planning Prevent Family Fights over Personal Items?

A few years after her death in 2014, Joan Rivers’ family put hundreds of her personal items up for auction at Christie’s in New York. Do families fight over personal items? Can good estate planning minimize the chances of fighting? Good estate planning is critical to family harmony over the small stuff.

As The Financial Times reported in “Why an art collector’s estate needs tight planning,” a silver Tiffany bowl, engraved with her dog’s name, Spike, made headlines when it sold for thirty times its estimated price.

This shows how an auction house can generate a buzz around the estate of a late collector, creating demand for items that, had they been sold separately, might have failed to attract as much attention.

A problem for some art and collectible owners is that their heirs may feel much less passionately about the works, than the person who collected them.

A collector can either gift, donate or sell in their lifetime. He or she can also wait until they pass away and then gift, donate, or sell posthumously.

The way a collector can make certain his or her wishes are carried out or eliminate family conflicts after their death, is to take the decision out of the hands of the family, by placing an art collection in trust.

The trust will have the collector’s wishes added into the agreement, and the trustees are appointed from the family and from independent advisers with no interest in a transaction taking place.

Many collectors like to seal their legacy, by making a permanent loan or gift of art works to a museum.However, their children can renege on these agreements, if they’re not adequately protected by trusts or other legal safeguards after a collector’s death.

Even with a trust or other legal structure put in place to preserve a legacy, the key to avoiding a fight over a valuable collection after the death of the collector, is to have frank discussions about estate planning with the family well before the reading of the will. This can ensure that their wishes are respected.

Learn more how a last will and testament can lay out your wishes and set expectations about personal items.

Reference: Financial Times (June 20, 2019) “Why an art collector’s estate needs tight planning”

What Should I Look for in a Trustee?
A Trustee Manages a Trust

What Should I Look for in a Trustee?

Selecting a trustee to manage your estate after you pass away is an important decision. Depending on the type of trust you’re creating, the trustee will be in charge of overseeing your assets and the assets of your family. It’s common for people to choose either a friend or family member, a professional trustee or a trust company or corporate trustee for this critical role.

Forbes’s recent article, “How To Choose A Trustee,” helps you identify what you should look for in a trustee.

If you go with a family member or friend, she should be financially savvy and good with money. You want someone who is knows something about investing, and preferably someone who has assets of their own that they are investing with an investment advisor.

A good thing about selecting a friend or family member as trustee, is that they’re going to be most familiar with you and your family. They will also understand your family’s dynamics.  Family members also usually don’t charge a trustee fee (although they are entitled to do so).

However, your family may be better off with a professional trustee or trust company that has expertise with trust administration. This may eliminate some potentially hard feelings in the family. Another negative is that your family member may be too close to the family and may get caught up in the drama.They may also have a power trip and like having total control of your beneficiary’s finances.

The advantage of an attorney serving as a trustee, is that they have familiarity with your family, if you’ve worked together for some time. There will, however, be a charge for their time spent serving as trustee.

Trust companies will have more structure and oversight to the trust administration, including a trust department that oversees the administration. This will be more expensive, but it may be money well spent. A trust company can make the tough decisions and tell beneficiaries “no” when needed. It’s common to use a trust company, when the beneficiaries don’t get along, when there is a problem beneficiary or when it’s a large sum of money. A drawback is that a trust company may be difficult to remove or become inflexible. They also may be stingy about distributions, if it will reduce the assets under management that they’re investing. You can solve this by giving a neutral third party, like a trusted family member, the ability to remove and replace the trustee.

Talk to your estate planning attorney and go through your concerns to find a solution that works for you and your family.

Learn why a trust is so valuable in estate planning.

Reference: Forbes (May 31, 2019) “How To Choose A Trustee”s