Why Even “Regular Folks” Can Benefit from Trust Funds
Trusts are Useful Even for "Regular Folks"

Why Even “Regular Folks” Can Benefit from Trust Funds

A trust is a useful tool, even if you’re not a wealthy person. There are many different types but the most basic types are revocable and irrevocable. A recent article from Business Insider “A trust fund gives you control over your money after you’re gone, and it’s not just for the super rich” clarifies when and how to use a trust fund.

Trust funds are often used to avoid having assets pass through the probate process. They allow for a tax-efficient means of transferring wealth, avoid or defer estate taxes and help with charitable giving. An experienced estate planning attorney can help clarify what type is needed, and how it can work with an overall estate plan.

Trust funds have a bad reputation for creating badly-behaved young adults, but they are a good planning tool for anyone. Some are more expensive to maintain than others, which is why they are often associated with wealthy people. However, they have the same purpose: to ensure that a person’s money goes where they want it to go. The directions can be as specific as you wish.

There are three people involved with this type of arrangement: the grantor, who puts their assets in the fund; the beneficiary or beneficiaries, who receive those assets according to specific terms that are set out ahead of time; and the trustee, the person or group of advisors or the organization that is responsible for managing things after the grantor has died. A grantor can put almost any kind of asset into a trust, but most people use them for real estate, bank accounts, investment accounts, business interests and life insurance policies.

If a trust is revocable, it means the grantor may make changes at any time and can generate income through the assets in the trust. The assets are included in the grantor’s estate and the grantor may pay taxes on the assets now and upon their death. Creditors can access the assets for any unpaid debts. Once the grantor of a revocable trust dies, the trust becomes irrevocable.

An irrevocable trust cannot be changed, once it is created. It can only be accessed after the death of the grantor. The assets are not included in the grantor’s estate and they do not have to pay taxes during their lifetime or at death. The taxes are usually the responsibility of the beneficiaries. Depending on how it is designed, creditors may not access the trust.

If you are considering setting up a trust, meet with an estate planning lawyer to discuss your unique situation and determine which type of trust works best for you and your family.

Learn why a revocable trust is so valuable in estate planning.

Reference: Business Insider (December 2, 2019) “A trust fund gives you control over your money after you’re gone, and it’s not just for the super rich”

Who Should I Name as Trustee of My Trust?
Selecting Trustee of a Trust Carefully

Who Should I Name as Trustee of My Trust?

Who do you “trust” to make certain that your financial legacy lives on? Kiplinger’s recent article, “Consider Your Trustee Carefully: It Makes a Difference,” advises you to remember that selecting a trustee of a trust should be thought of as more of a business decision than a personal one. A trust can be perfectly designed for success, but its goals may not be fully carried out, when a trustee lacks knowledge, dedication, or objectivity.

You should know the trustee’s fiduciary responsibilities to make an informed choice when selecting someone to perform the duties. Consider more than a person’s understanding and respect for your financial goals and values, because a trustee must also play a big part in investment management, tax planning and filing, making appropriate distributions to beneficiaries or for their benefit and protecting the trust’s assets.

The trustee must regularly review beneficiaries’ requests for money and decide when to approve or deny distributions, in accordance with the trust’s instructions. Making this decision can be difficult and stressful for someone with a personal connection to the beneficiary.

One option is a corporate trustee, like a trust company or bank trust department. They can provide an objective, third-party opinion based on the long-term objectives of the trust. A corporate trustee can serve as either the sole trustee or co-trustee of your trust. Naming a professional trustee, along with a trusted friend or family member may be a good move.

Using a corporate trustee can potentially diminish unanticipated family tension, and also enables the sharing of fiduciary responsibilities with the co-trustee. The co-trustees must act in concert, unless the trust allows one co-trustee to act alone. It also may let the corporate trustee make the tough decisions in this situation, without doing further harm to the family relationship of the personal co-trustee and beneficiary.

Choosing the right trustee(s) can help make certain that your financial legacy and intentions will be carried out, plus, it will be done professionally and objectively solely for your heirs’ benefit.

Selecting a good trustee is an important decision.

Reference: Kiplinger (October 14, 2019) “Consider Your Trustee Carefully: It Makes a Difference”

Should I Use a Trust to Protect My Children’s Inheritance?
Protect Children's Inheritances and Keep the Family Treasure in the Family Bloodline

Should I Use a Trust to Protect My Children’s Inheritance?

Parents with savings often want to protect their children’s future inheritances. Using a trust is a great way to do keep everything in the family bloodline.

nj.com’s recent article answers this question: “We have $1.5 million. Should we get a trust for our children’s inheritance?” According to the article, parents could first protect the assets for the benefit of the surviving spouse during the spouse’s lifetime.

After that, they can have the remainder of the assets pass in trusts for each of the children, until they reach a certain age or ages.

A lifetime trust is one that’s created during an individual’s lifetime. This is different from a trust that is created after a person’s lifetime through the operation of that person’s will.

Usually the individual who sets things up (the “Grantor”) will retain control over the assets, including the right to revoke the assets during his or her lifetime.

Another option is to have these types of trusts continue for the benefit of the grandchildren.

The children’s trusts can have instructions that the assets and income are to be used for the health, maintenance, education and support of the child.

The parents would need to name a trustee or co-trustee. This is the person who’s responsible for investing the assets, filing tax returns and paying taxes (if necessary). He or she will also distribute the assets, according to the terms that are laid out.

This is complicated business, so meet with an experienced estate planning attorney to determine the best strategies based on your circumstances and goals.

A revocable living trust provides a great foundation for your estate plan.

Reference: nj.com (October 16, 2019) “We have $1.5 million. Should we get a trust for our children’s inheritance?”