“A trust is a valuable tool to leave a legacy and plan for taxes, but only if you set it up so that it works just as you intended. Unfortunately, people tend to make one very common, and basic, mistake.”
A trust can be a valuable vehicle that lets you maximize tax-planning opportunities within your estate plan, detail exactly how you want to distribute your assets and make certain that your vision for your legacy is carried out precisely.
Kiplinger’s recent article asks, “What Type of Trust Solution is Best for You?” The article notes that people often make one common mistake when setting up their own trusts—they chose the wrong person (often a family member) to administer it when the time comes. Since the “grantor” of the trust wants to be sure her wishes are faithfully carried out, she will need to designate a trustee who can competently and effectively handle the role.
Trusts will affect people about whom the grantor cares, so it’s natural that those creating trusts often feel obligated to name a person close to the family as trustee. It can be efficient for the trustee to know the grantor and the beneficiaries. However, it may create issues with the administrative, fiduciary, and legal requirements that the trustee is tasked with executing.
In some situations, you may want to hire a trust company or bank to serve as corporate trustee. They have the expertise and capacity to conduct the administrative and reporting tasks, and the personnel to support long-term asset protection and distribution strategies. However, a corporate trustee may not be familiar with the grantor or the beneficiaries and may not be able to provide the level of care or accessibility the family may need.
Trusts can be dynamic tools for integrating tax planning into an estate plan to efficiently transfer wealth to heirs. Trust assets can continue to grow tax-deferred or tax-free (depending on the account), for many additional years. A trust can be written to support whatever objectives the grantor has and can provide as much flexibility or latitude as he wants, provided that the trust structure and distribution schedule comply with IRS requirements.
Work with an experienced trust attorney who understands your goals for your legacy to identify the most appropriate solution, so you can rest easy knowing that your wishes will be carried out.
Reference: Kiplinger (April 30, 2018) “What Type of Trust Solution is Best for You?”