Trust Me

An important part of an estate plan, trusts offer benefits other documents don’t. #MoneyMonday #avoidprobate #trusts

According to the financial calendar you should have completed your estate plan during the month of September 2022. An estate plan is comprised of those documents we keep in the safe for when tragedies or unfortunate events occur. If you are still clueless, I’m referring to financial /durable power of attorney, medical power of attorney, directive to physicians/ living will, last will and testament and trust.

One reason people give for putting these tasks off is that they think they are going to die if they prepare these documents. Obviously, that’s not true. Preparing the documents doesn’t make the event happen. We psych ourselves out with this kind of thinking. We should be thinking about estate planning, and thinking strategically. For example, do you need all those documents?

Let’s focus today on the trust.

A trust document establishes a fiduciary relationship  by allowing a third party (also known as a trustee), to hold or manage assets of the Grantor or Settlor ( which would be you); for the benefit of the beneficiaries ( which could include yourself) . But before we go further, it may be useful to identify some types of trusts. There are many, and once you research and explore, you may find just the right trust instrument for you and your needs. Here are two:

Marital Trusts. This trust is designed to provide benefits to a surviving spouse.

Charitable Remainder Trust. This type of trust would allow you to receive income for a defined period and then the remainder of the trust would go to a charity. Now, this is different from a Charitable Lead Trust, which would allow certain benefits to go to a trust and then the remainder transferred to the beneficiaries.

These are just a few of the trust choices available to fit your circumstances, but why even consider a trust?

The most common reasons to consider a trust are probate savings, privacy, legacy, and control.

Having a trust provides the opportunity to avoid probate. One of the outcomes of probate is that your life and death is a matter of public record. Your affairs may not remain private. You also have the economic cost factor of taxes in probate. From a wealth control perspective, a trust can provide you with options concerning who should receive an inheritance, when and under what conditions. For example, you may decide to give an incentive for your children in the event of your passing. You may decide that your youngest child will not receive as much as your eldest unless he or she obtains a college degree. The point here is that your trust allows you to control wealth distribution even from the grave.


How to Think About Trust

If you are going to establish a trust, then it means you have to transfer some of your assets into the trust. We call that funding the trust. Another way to think about it is reti-tling property and financial accounts into the trust. Many people will establish trust pa-per work, without transferring assets. If you fail to transfer assets, then there is no trust. Which then begs the question what should be transferred into the trust?

There are practical reasons and timing why things should or should not be transferred into a trust. For example, transferring your house into a trust means that you have to “retitle” the property. While this may not affect your ability to sell the property it could have real operational consequences while you are still alive. For example, if you wanted to refinance your home but it has been placed in a trust, you would have to transfer the property from the trust back to you personally  in order for the bank to refinance your house. Once completed, then you can retitle the house back into the trust. So, timing and practical common sense enter into your decisions when it comes to funding and other aspects of establishing a trust.

That’s WHAT’S UP!

Most people know when they are not feeling well to visit the doctor or hospital emergency room. But how do you know when you need to check in with a financial coach? What are the symptoms? Do you spend money as a way of dealing with your negative emotions? If things are not going well does shopping really take over? What about avoidant behavior such as not paying bills, opening envelopes or checking on taxes? What about not having financial goals, do you have any? Finally, do you discuss your finances in confidence with any-one? Having a financial coach or getting a check up is not simply an issue of not being able to pay your bills. Financial health is much more than that! Consider getting a financial check up be-fore the year is through. And that’s what’s up!

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assis-tant, and CEO of Give2Getrich, LLC . Give2Get Rich, LLC 2022. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.

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