WTOP’s article, “7 questions to ask when taking control of a trust,” says that while having more wealth at your disposal may give you an increased sense of security, it’s also natural to have some fears about making a poor decision with new wealth. However, asking a few questions may give you the information that you need to be more confident.
What are the trust’s rules? There are different types of trusts, each with its own set of legal rules. Many are extremely complex. Therefore, you should work with a trust attorney to be certain you’re doing things right. You should also look at the trust agreement or the will provisions that established the trust. This will give you the instructions for managing, investing and distributing trust assets. It will also detail your powers and how you can use the funds.
What’s the history of this trust? If more information is needed on the history or intentions behind the trust, talk to the advisers who are involved with the trust. This can give you a sound history on how the trust has operated in the past.
How are the trust funds invested? Investors should know what assets they own and why. This also applies to trust assets. Once you establish an appropriate asset allocation for the trust, you may want to have an investment policy statement to ensure that the ongoing management of your assets coincides with your intended allocation, risk tolerance, and objectives.
What about taxes? If a trust earns income, it will likely be subject to income taxes. Taxation of trusts can become extremely complicated, so work with a tax attorney on this.
What protection is there from creditors or a divorce? There are some trust structures that increase your odds of shielding assets from a potential lawsuit.
Who would be the beneficiary of this trust if I die? When a trust is first established, the original grantor may designate the next beneficiary if you pass away. However, if a successor beneficiary isn’t stated in the trust, you need to consider how this asset affects your existing estate plan and change your documents to direct the asset at your death.
How can I monitor the trust? Depending on the complexity and value of the trust, you may want to have a team of advisers to help you. Think about the information you’ll need to assess the performance of the trust assets and the quality of the advice you’re getting.
Reference: WTOP (April 18, 2018) “7 questions to ask when taking control of a trust”