Good Investments
that are Right for You

AN INTRODUCTION TO TRUSTS

Fountain Pen Lying on the

“Trusts? They’re for rich people.” We often hear this when we start a discussion about the role a trust can play in a family’s overall estate strategy.

It’s certainly true that trusts are used effectively by some wealthy families. It’s also true that trusts can be used for practical, “everyday” estate strategies.

What is a Trust?

A trust is a legal arrangement under which one person, the trustee, manages property given by another party, the trustor, for the benefit of a third person, the beneficiary. Incidentally, you can be the trustor, trustee, and the beneficiary. However you will need to consider a co-trustee and a successor trustee. A trust gives you a high level of control over the distribution of your estate because trust property will be distributed according to the terms of the trust.

A 2021 study found that 56% of Americans believe having an estate strategy is important. Of the estate strategies created in 2021, nearly 20% included a trust.1

When considering adding a trust to your estate, it’s important to remember that trusts involve a complex set of tax rules and regulations. Before moving forward, we encourage you to work with professionals (us, your attorney and/or your CPA) who understand trusts and who are familiar with the financial strategy that we have created for you.

“…BUT seek first His kingdom and His righteousness, and all these things will be given to you as well…” Matthew 6:25-34

Distribution of Your Estate

With your estate, trusts are just one choice to consider when you start to make plans for the distribution of your assets.

“There are a number of ways your estate can be distributed to your heirs after your death,” writes Mick Owens in his popular book, Diamond of Life, The Five P’s of Success and Significance. “Each allows a different degree of control over distribution, and each poses different challenges and opportunities.”

Intestacy: If you die without a will, it’s called dying “intestate.” In these situations, the probate court will order your debts paid and your assets distributed according to state law. If this happens, your heirs may have to endure a long, public probate process, where the fees can consume over 5 percent of your gross estate.2

Wills: A will outlines how you would like your estate to be distributed, but using a will guarantees probate. Upon your death, the probate court will first decide on the validity of your will, then order the payment of your debts and the distribution of your estate.

Trusts: Trusts can be established during your life or at death. They give you maximum control over the distribution of your estate. Trust property will be distributed according to the terms of the trust, without the time, cost, and publicity of probate.

Joint Ownership: Another way to distribute your estate is through jointly held property—specifically, joint tenancy with rights of survivorship. When you hold property this way, it will pass to the surviving co-owners automatically, “by operation of law.” Because title passes automatically, there is no need for probate. Remember, joint tenancy can involve any number of people, and it does not have to be between spouses.

Contracts: Another way to pass your property interests is through beneficiary designations. With a retirement plan, for example, you probably have designated a beneficiary for the proceeds of the contract. The rights to the proceeds will pass automatically to the person you selected. Just like joint tenancy, this happens automatically, without the need for probate. Other considerations are Transfer on Death (TOD) or Pay on Death (POD). Different states may have different rules.

What is the best approach for you? Much will depend on your distribution goals. When we work with families, we have a series of questions we ask to discover what approach—or combination of approaches—can help them pursue their goals.

  1. LegalZoom.com, May 11, 2023 https://www.legalzoom.com/articles/estate-planning-statistics#:~:text=Fifty%2Dsix%20percent%20of%20Americans,guardian%20for%20their%20young%20children.
  1. Diamond of Life, The Five P’s of Success and Significance

Other Recent Articles

Quiz: Caring for Aging Parents

One benefit to self-insurance is that you can pocket money that you have paid in insurance premiums. Learn more about whether self-insurance is a concept you'd like to explore further with your financial adviser.

Strategies for Managing Your Digital Estate

One benefit to self-insurance is that you can pocket money that you have paid in insurance premiums. Learn more about whether self-insurance is a concept you'd like to explore further with your financial adviser.

What Is Sector Investing?

One benefit to self-insurance is that you can pocket money that you have paid in insurance premiums. Learn more about whether self-insurance is a concept you'd like to explore further with your financial adviser.

Quiz: Caring for Aging Parents

One benefit to self-insurance is that you can pocket money that you have paid in insurance premiums. Learn more about whether self-insurance is a concept you'd like to explore further with your financial adviser.

Strategies for Managing Your Digital Estate

One benefit to self-insurance is that you can pocket money that you have paid in insurance premiums. Learn more about whether self-insurance is a concept you'd like to explore further with your financial adviser.

What Is Sector Investing?

One benefit to self-insurance is that you can pocket money that you have paid in insurance premiums. Learn more about whether self-insurance is a concept you'd like to explore further with your financial adviser.