Financial Planning Fridays #44: How Your Family May Benefit From A Trust

Today we wanted to discuss one of the most important tools of estate planning.

Proactive estate planning can play a crucial role in managing and distributing assets in a manner that aligns with your wishes while maintaining privacy, minimizing tax liability, and preserving wealth for future generations.

One of the most versatile and effective tools in estate planning is a trust. Due to various considerations and legalese, trust planning can become very complex very quickly. However, at its core, when working with a well-versed team, it doesn’t need to be.

When working with our clients, there are generally five key benefits for which we are trying to solve with a trust:

1. Asset Protection: Irrevocable trusts, once created, remove assets from the grantor’s estate, shielding them from creditors and potential legal claims. By placing assets in a trust, individuals can ensure that their wealth is safeguarded for their intended beneficiaries, even in the face of unforeseen circumstances such as divorce or future lawsuits.

2. Probate Avoidance: Probate, the legal process of validating a will and distributing assets, can be time-consuming, expensive, and subject to public scrutiny. By establishing a trust, individuals can transfer assets to their chosen beneficiaries without going through probate. This allows for a faster, more private, and cost-effective transfer of your assets.

3. Privacy: Wills are typically a matter of public record, which means anyone can access information about your assets and beneficiaries. In contrast, trusts provide privacy since they are not usually subject to public disclosure. Maintaining confidentiality about your estate’s details can be desirable for various reasons, such as protecting family dynamics, avoiding unwanted attention, or shielding beneficiaries from potential predators.

4. Control and Flexibility: Trusts can offer you a high degree of control and flexibility over the distribution of your assets. You can specify conditions, such as age, milestones, or educational achievements, that must be met before beneficiaries can access their inheritance. This control ensures that assets are managed responsibly and align with your vision for the future. Trusts can also be designed to accommodate changing circumstances, allowing trustees to adapt to a changing world and the evolving future needs of your beneficiaries.

5. Tax Efficiency: Trusts can play a vital role in minimizing tax liabilities, especially in situations involving substantial estates. Certain types of trusts, such as bypass or credit shelter trusts, can help individuals take full advantage of estate tax exemptions, potentially reducing or eliminating estate taxes. Additionally, generation-skipping trusts enable the transfer of assets to future generations while minimizing or deferring taxes.

In summary, setting up Trusts can provide you with the ability to protect your assets, maintain privacy, exert control, and optimize tax efficiency. By creating a trust, you can customize your estate plan to reflect your wishes and protect your wealth for future generations. At Presilium we work with clients all the time on designing their legacy and then work with an experienced estate planning attorney who can prepare the final trust documents.

Be on the lookout for our next Financial Planning Fridays episode. Subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.