It may be difficult for some to explain when a person mentions the word, Trust. Most people are familiar with the phrase “trust fund” but cannot explain it. As a former estate planning attorney turned Trust Officer, two worlds collide, and common sense must reign.
It is easy to learn the a-b-c’s of trusts. There is a Grantor or Settlor who makes the trust, a Trustee who manages the trust as to the Grantor’s wishes, a beneficiary who benefits from the trust, and finally the assets that fund the trust. These requirements are mandatory and completely interdependent, if one requirement is non-existent then no trust exists.
When a well-written, practical trust is funded it must be administered. This is where the complexity of a trust meets reality. It is more than just a vehicle to avoid probate, avoid taxes, and/or keep peace in subsequent marriages. To administer a Trust, sometimes it takes multiple professionals, such as the Trustee, a financial advisor, an investment director, and an attorney to handle the day-to-day management of most Trusts to ensure the funding of generations of family members or extended family members or charities for decades and leave an ever-lasting legacy to assist in economic downturns and/ or personal financial hardships.
The pleather of trusts is most impressive. There are revocable, irrevocable, testamentary, living trusts, life insurance, charitable, generation skipping and sub-trusts such as special needs trusts, just to name a few. The similarity of these trusts is simple, they are all private, flexible, and difficult to challenge if there
is no mental competency issue or undue influence. Should one of these issues come up, a mediation/arbitration clause can keep the family affairs out of the courtroom and no-contest clauses can keep the troublemakers from causing additional grief.
The distinctions between these trusts are important because not all situations are alike. Trusts can evolve to meet the challenges that ordinary people face and there is a clause for that, such as distributions to disabled persons, spendthrift clause, gone missing clause, exclusion clause and the distributions to minors, just to name a few as this list is not all inclusive. There are thousands of trust configurations, it all depends on your facts and circumstances.
The next time you think about an estate plan or revise the current estate plan you have, if it does not include a trust, seriously consider using one in your plan. The benefits long outlive your arduous work and diligence in getting one done. Look for people who specialize at least 80% of their time in trust work and legitimate estate planning issues. It is money well spent when you have an estate-planning specialist with knowledge in the area that you need whether it is agriculture, small business, corporations, real property, securities and/or special needs to assist you in managing your family wealth plan.
The posts expressed are views of FSTC and are not intended as advice or recommendations. For informational purposes only. FSTC does not offer tax, legal, or investment advice, professional counsel should be sought for tax or legal advice.
By: Roseanne Starkey, Esq.
For questions or comments email: RStarkey@fs-trust.com