What to think about when deciding whether a trust is right for you.
Though we can help you with a wide range of wealth management services, trusts are the bedrock of our business — our namesake and how we began.
Yet, we know not everyone understands what a trust is or why you might need one. To help, here’s a primer on trusts, along with some of the most common reasons to have one.
Explaining the Basics
Simply put, a trust is a fiduciary arrangement that allows a third party (a trustee) to hold assets on behalf of a beneficiary or multiple beneficiaries, and distribute those assets in a specified manner. Unlike a will, which goes into effect upon death and usually requires the involvement of probate court for authentication, trusts allow for more flexibility and timely distribution. A trust can take effect before or after death, or in the event that the grantor is incapacitated.
It’s a common misconception that trusts are only for the wealthy. That’s not true and actually, trusts can be helpful in a wide range of situations, from preserving assets for the next generation of family members to transitioning property or making a charitable contribution.
There are many types of trusts. Trust Point can offer guidance on helping you understand the differences and what might work best for your goals.
Key Trust Benefits
As mentioned, the ability of avoiding probate makes trusts very attractive. Trusts can significantly reduce the time and expense associated with transferring assets to heirs without introducing any adverse income, estate, or gift tax consequences. Trusts also protect the privacy of the grantor and beneficiaries, as opposed to probate files, which are public.
The ability of a trust to ensure the proper management and distribution of assets should the grantor become incapacitated is also a significant benefit. The reality is that the future is largely uncertain. If you were to have a medical emergency that left you unable to oversee your finances, you could still be assured that your resources are handled according to your wishes by your trustee. And you can be very specific in how, when and to whom your trust is structured and carried out.
Tax reduction is another common trust benefit, most notably in the case of irrevocable trusts. Trusts can either be revocable (amended after they are created) or irrevocable (cannot be amended). An irrevocable trust might generate tax benefits related to the transfer of assets out of your estate and, in certain scenarios, assets can be sheltered from estate tax after your death.
It’s important to note, however, that for all the benefits trusts can provide, they do require more work, planning and legal expenses to set up. Trust Point does recommend working with a licensed and reputable attorney to help you plan.
How We Can Help
If you choose to pursue a trust, Trust Point will dutifully follow the terms of your agreement and serve in the best interest of your beneficiaries. You can be certain we will administer the trust and protect your assets. With more than a century of trust experience, you can be confident that your assets will be managed and distributed properly and with the utmost care. Learn more about how to get started and what we can provide on our Trust Services page.