Making the most of trusts?

Should I have a trust? Are the trustees that I have named the right people for the job? How do my trusts, estate plan, and financial plan work together? These are some of the questions that prospective clients recently have asked me.

What are trusts?

I like to think of trusts as agreements with instructions. Often attorneys create trusts for clients along with other estate planning documents like wills and health care proxies. Typically trusts are fiduciary arrangements involving three parties:?

1. Grantor – individual who contributes assets to the trust?
2. Trustee – legal owner of the trust; person responsible for managing the assets?
3. Beneficiary – person who gains access to, or benefits from, the trust’s assets?

Why set up trusts?

Clients generally set up trusts to enjoy certain benefits, which may include:

• Minimizing taxes – grantors seeking to reduce income or estate taxes
• Controlling wealth – grantors control when and to whom assets from the trust are distributed?
• Retaining privacy – in the event of death, trust assets may pass to the beneficiary outside of probate?
• Protecting legacy – carefully structured trusts may help protect the assets from beneficiaries’ creditors or beneficiaries themselves?

There are many types of trusts.?Some spouses set up trusts to provide benefits when one partner predeceases the other.?Other grantors set up Irrevocable Life Insurance Trusts (“ILITs”) to be beneficiaries of life insurance policy proceeds.?Charitably inclined grantors may set up Charitable Lead Trusts, Charitable Remainder Trusts, or Grantor Retained Annuity Trusts.?Whether or not a trust makes sense for you depends on your unique needs and situation.??

Should I have a trust?

When people ask me if they should have a trust, I like posing two questions:?

1. What goal are you trying to achieve??
2. How much control do you want to retain around the assets in the trust??

What goal are you trying to achieve??

Clients owning large estates seeking to minimize taxes often set up trusts.?Today each person has an estate and gift tax exemption of $12.92 million ($25.84 million for married couples).?Current law decreases this level to $5.49 million after 2025.

Other clients of mine who do not have children have set up living trusts to facilitate the transfer of their real estate and non-retirement investment accounts to their beneficiaries outside of probate upon their death.?They want the transfer of their assets to bypass the courts and be completed privately.?

How much control do you want to retain??

A major distinction across the different types of trusts is whether they continue to be controlled by the grantor after the trusts are established.?For instance, a revocable trust, known as a living trust, is flexible and stays in the control of the grantor throughout her lifetime.?While a revocable trust may help avoid probate in the transfer of assets, it usually is treated like any other asset the grantor owns during her life and is subject to estate tax upon her passing.??

In contrast, an irrevocable trust moves out of control of the grantor.?Once executed, the assets in the irrevocable trust are out of the grantor’s estate, with the grantor having no ability to change any terms of the trust, including the ability to dissolve it.?

Who can help me with my trust?

My team helps clients with their trusts. Here are some examples:

• We work with clients and their attorneys to ensure that investments titled in trust are managed as intended. In this instance, clients retain our team as the Investment Advisor for their trusts. We may, in this circumstance, buy and sell positions in an investment account for the purpose of generating income as stipulated in the trust document, while incorporating tax and estate planning strategies.
• We facilitate introductions to attorneys that we have worked with when clients want an independent view of their existing trusts or to set up trusts and refresh estate plans. We work closely with the client and the attorney to ensure that the financial and investment plans that our fiduciary advisory team manage align to the trust and estate plans the attorney draws up for the clients.
• We help clients that want professionals managing their trust engage Procyon Trust, an independent trust company, as their corporate trustee, co-trustee, or agent for trustee. Procyon Trust is a Trust Representative Office of National Advisors Trust Company, one of the largest independent federally chartered trust companies, and specializes in providing comprehensive trust services to individuals and their families. Procyon Trust does not offer investment management services; it performs administrative duties as outlined in the Trust document. These duties may include distributions, statement production, tax reporting, bill paying as well as principal and income trust accounting.

How can I learn more?

Let's chat. I enjoy offering prospective clients complimentary 30-minute consultations. During this time together, we can talk about what is important to you and explore whether my team can be helpful. I can be reached at (475) 232 – 2713 or [email protected]

Caroline Wetzel is a CERTIFIED FINANCIAL PLANNER TM (CFP?) and Vice President, Private Wealth Advisor with?Procyon Advisors LLC.?Procyon Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”).?This article is provided for informational purposes and may also include opinions and forward-looking statements which may not come to pass. Information is at a point in time and subject to change. Procyon Advisors, LLC does not provide tax or legal advice.?https://www.procyonpartners.net/team/caroline-wetzel/