Estate planning is an essential part of every written financial plan. A cookie cutter approach to estate planning doesn’t usually work well and some of the decisions can be complicated and very difficult to make. Do you want to leave the money out right to the children where they are left to their own devices? How many times does first generation money disappear with the second generation? Is it better to leave the money in trust for them? For those who want to rule from the grave, leaving the inheritance in trust allows one to do so. However, the terms of your trust can also be creative and flexible. But there is so much more to consider.
Do all of the beneficiaries have the time, talent and inclination to manage the inheritance? Could there be a squabble among the heirs? Does a beneficiary have a special need? Are the beneficiaries going to be happily married forever? Do you want your assets to potentially pass to the spouse in a divorce? Could there be a current or future problem with drugs or perhaps health issues? Do you want to possibly protect the inheritance from the beneficiaries’ creditors? Do you want the inheritance to pass down your bloodline over multiple generations? Answers to these and other questions may help guide your decision about creating a trust with an attorney.
Once you decide that setting up a trust is a good idea, one of the most important decisions to make will be about the trustee of the trust. Often people will want a close relative to oversee the money. Why not name Uncle Charlie, Aunt Sally, or a close friend. However, this can put the relative or friend in an awkward position with the beneficiaries regarding the management of the money (especially in a declining market), dispersal from the trust, etc. It also assumes that they have the ability to properly manage the assets and the time to do so. Who will take over when they become sick or die?
There are benefits to naming a corporate trustee, including their expertise in trust administration with set policies and procedures. They are regulated by both federal and state law. The corporate trustee will work closely with your financial, legal and tax advisors. They are impartial when dealing with beneficiaries. Finally, they provide a great deal of continuity and permanence. The beneficiaries should have the right to fire the trustee and to hire a new corporate trustee, but not a friend down the street. Sometimes the beneficiaries can act as co-trustees, but without a power to disburse funds to themselves.
But aren’t corporate trustee’s expensive? Some probably are. But consider the potential cost of not using a professional trustee. While one often thinks of big banks as a corporate trustee, there are less expensive and equally competent independent trust companies. In working with our clients we look at their needs and desires and then match those against multiple trust companies to determine the best fit.
Whether thinking about naming a professional corporate trustee in your estate documents, or perhaps changing the trustee of an existing trust, please keep in mind that there are alternatives to those you see advertised in the media. If you would like to learn more about independent trust companies and their benefits, please schedule a complimentary meeting with us.
The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and are subject to change.
Investment Advisory Services may be offered through ProVise Management Group, LLC.