As with estate planning in general, many people think trusts are only for the very wealthy. In reality, personal trusts are an essential planning tool that can deliver benefits for a wide range of individuals and families. Whether your estate is modest or substantial, establishing a trust can help you achieve greater control, ensure privacy, minimize taxes, and protect your legacy. In fact, trusts have grown in popularity precisely because they are so flexible and able to address a variety of objectives, from the simple to the complex.
Establishing a trust can be relatively easy, but there are a few things you should know before you start.
Choosing the Type of Trust
At its core, a trust gives you the ability to control how and when your assets are distributed — often well beyond your lifetime. A well-crafted trust can also protect those assets from creditors or from beneficiaries who may struggle with money management.
Different types of trusts serve different purposes. For instance, a revocable trust offers flexibility, allowing you to amend or rescind the trust. You can serve as trustee of your own revocable trust, change the trust’s terms whenever you like, add or withdraw assets at any time, and name a successor trustee to take over should you no longer wish or be able to serve as trustee.
An irrevocable trust generally cannot be changed once established. It does allow you to permanently remove assets from your taxable estate and provides your estate with tax benefits and asset protection from creditors.
Each type of trust serves different goals and the right choice depends on your financial situation and long-term wishes.
Selecting Assets for the Trust
Trusts are designed to hold a variety of assets including cash, stocks and bonds, real estate and other property. As you select assets, consider their value, tax implications, and the needs of your beneficiaries. Evaluate the potential benefits and risks that accompany the assets you choose to put in the trust. High-value or appreciating assets are often good candidates, especially if your goal is to reduce estate taxes or protect them from legal claims.
Appointing Trustees and Beneficiaries
Trustees play a central role in the management and distribution of your trust’s assets so appointing trustworthy individuals or entities as trustees and beneficiaries is crucial. The trustee manages the trust assets and distributes them to the beneficiaries according to your directives. You can appoint yourself as the initial trustee, with a successor trustee in case of incapacity or your death, or choose a third-party entity like a bank or trust company to serve as the trustee.
When selecting beneficiaries remember family dynamics and ensure the trustee and beneficiaries can work together — and clearly outline your instructions to minimize confusion and avoid disputes.
Start with a Free Consultation
Setting up a trust isn’t just about protecting wealth, it’s about protecting the people you care about. At HH&J, we offer a free consultation to help you understand your options and begin building an estate plan that brings you peace of mind.
Let’s talk about how a trust can work for you — no matter the size of your estate.