Trusts generally provide many beneficial estate planning advantages and can be an appropriate way to protect assets, before and after death. Be forewarned: there are pitfalls that can undo your best planning.
There are many different types of trusts that can be used to achieve a number of estate planning, family and tax goals. The right trust can protect your assets, provide exacting limits on how assets are distributed and help minimize tax liability.
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 do not choose the best person to administer the funds. 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 a trustee, and who know the grantor and beneficiaries.
However, this may create issues with the administrative, fiduciary, and legal requirements of the trustee. In some situations, it may be appropriate to hire a trust company or bank to serve as Corporate Trustee. Professional trustees 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. These pros and cons must be considered when making these decisions.
Trusts can be dynamic tools for integrating tax planning into an estate plan to efficiently transfer wealth to heirs. With good investment strategies implemented by knowledgeable trustees, assets can grow for many additional years. A trust can be written to support the grantor’s objectives and can provide both flexibility and structure while assuring compliance with IRS requirements.
Take the decision of appointing a competent trustee very seriously. Devote the time needed with your trust attorney to identify the best individual or entity to manage your trust. Work with an attorney at Grimaldi Yeung Law Group to set the goals for your trust and your legacy. We will work with you as a team to create the best trust for you and your family.