Are Trusts Right for You?
Trusts remain a bit of an enigma to most people - something that only lawyers seem to understand. But this shouldn’t be the case because trusts can play a critical part in most people’s financial and estate planning.
Common Misconceptions about Trusts
As we talk with clients and prospects, many don’t think that trusts apply to their situation. And, the new tax law seems to have furthered this misperception. However, when properly conceived and implemented, trusts can be effective tools for the reasons described below. Yet, they shouldn’t be developed without intentional contemplation of the requirements and long-term implications. Here are some common misconceptions about trusts:
Trusts are only a tool for the very wealthy. This is inaccurate. Trusts can be effectively used by most people for a variety of reasons and should be considered as a part of most estate planning efforts.
Trusts are complex and costly. While this can be true, it can be quite inaccurate as well. It really depends on the structure. You should know your options and the implications of any decisions you make.
Trusts are a burden. Again, this depends on how it is implemented, but in many ways, the framework of a well-designed trust can create freedom and peace. However, they are legal entities and there are rules to follow.
Trusts are rigid legal structures. The opposite is actually true. Trusts have enormous flexibility in many areas, so they can generally be tailored to your specific needs. In fact, sometimes their flexible nature can cause decision-making to be more difficult.
Trusts say “I don’t trust you” to your family. Again, the opposite should be true. A trust can be an indication of love as it reflects thought, care, and purpose.
There are some legitimate reasons to contemplate trusts. These include: asset protection, asset transfer, estate tax efficiency, charitable giving, generational planning, or simply, probate avoidance and privacy.
Aspects of Trusts That Can Be Confusing
Yet, we know trusts can be quite confusing. Why?
There are many types (e.g., Grantor vs. Non-Grantor, Revocable vs. Irrevocable, etc.) and acronyms galore (e.g., GRAT, GRUT, ILIT, DPAT, IDGT, QPRT, CRUT, etc.)!
There are many critical decisions to make, such as: What form should the trust take? Where will the situs be? What assets should be placed in the trust? Should I name a Trust Protector, and if so, who? Who are the beneficiaries? How will income or corpus be distributed? What happens when the trust terminates? These questions all require long-term strategic thinking.
Additionally, there are “softer” issues that require careful thought, such as: How to best address the needs of various family members? Who to name as Trustee and how to ensure they understand their role? How to set and communicate expectations to beneficiaries and non-beneficiaries? Are you ready to “let go” of control?
Don’t Accept a Cookie-Cutter Solution
As you are considering your estate plan, it is important for you to know the variety of roles trusts can play in achieving your goals and vision. Start by getting a broad landscape of options before you. Don’t accept a “cookie-cutter” answer. Explore the flexibility of each option and understand its pros and cons. Look down the corridor of time at how different outcomes may impact future generations. When you have thought broadly and strategically about the different trust options, you can then more confidently move forward with the implementation process.
Kings Path’s goal is to help you understand what your options are, the pros/cons of each, and how these do or do not align with your vision and values. This takes time, patience, and collaborative brainstorming, so you don’t look back and wish you would have done something differently. Then, we work with the right attorneys to discuss how to design, communicate, implement, and manage the trusts put in place.
