Personal Trust can be a Powerful Financial Planning Tool

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Presented by Fred Gaskin

With many people spending more time at home these days, I’ve started to field more and more questions from clients interested in updating their financial and estate plans. The questions have ranged from the more basic, such as financial budgeting, all the way to the complex, which usually involves estate planning. A common question is whether a client should have a personal trust.

Most of us are familiar with wills and likely have one in place. But when people think of trusts, they often picture something reserved for the very wealthy. That’s not the case. A personal trust can actually be helpful for people in a variety of situations.

Simply put, a trust is a legal relationship in which the trustee, who can be you or someone you name, holds legal title to assets and manages them on behalf of the beneficiaries of the trust. Those beneficiaries could include you, your family or your favorite charities. The assets inside the trust could include your home, investment accounts, and more. You can set up the trust so you always have access to the assets at any time. For example, you could sell investments held in the trust to pay college tuition for a child.

Trusts can offer a number of benefits: 

– Maintains the integrity of your estate 

– May minimize transfer/estate taxes

– Helps your beneficiaries avoid the expense, delay, and publicity of probate

– Allows you to create rules for how your assets will be distributed

– Allows for charitable giving strategies

– Enables sound financial decision-making should you become incapacitated

– Allows for detailed planning in unique family situations, such as ongoing care for a special needs child

A common approach we see is an individual setting up a trust and acting as the trustee, with the intent to do so until their death. Assigning someone as a successor trustee ahead of time, gives them the latitude to hand over trustee responsibilities to someone else should they be unable to continue due to age or illness.

Deciding who should succeed you as trustee is a critical decision. Your trustee should be able to impartially manage your financial assets, and be willing to assume all the accompanying legal complexities and administrative duties. They should be able to fulfill this responsibility for the full term of the trust, which could be decades into the future. 

Because of the responsibilities, time commitment, and knowledge the role demands, many people choose a corporate trustee to succeed them. A corporate trustee can offer the benefits of financial expertise, unbiased decision making, fiscal responsibility, and sworn fiduciary duty to always act in the best interest of the trust and its beneficiaries. This provides continuity to ensure that your wishes are carried out and your estate is carefully managed into the future. A corporate trustee can serve as the sole trustee, or as co-trustee, working alongside a family member or trusted individual you choose. 

Few solutions are perfect and establishing a trust does involve near term expenses (legal and time, for example), but these costs should also be balanced against the benefits over time that a Trust can provide you, as well as your heirs. A trust can serve as an integral part of your overall financial plan. It can offer tremendous flexibility in establishing stability and security for your family now and into the future. 

As I’ve pointed out in prior columns, the hardest part for most investors in these situations is just getting started. Once you’ve jumped into the process, you’ll realize that determining whether a personal trust is right for you or not is a terrific learning exercise. You’ll have more confidence, and importantly, a better understanding of what you need to do to manage your future.

Fred Gaskin is the branch leader at the Charles Schwab Independent Branch in Bluffton. He has over 35 years of experience helping clients achieve their financial goals. Some content provided here has been compiled from previously published articles authored by various parties at Schwab.

The information here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. This information does not constitute and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, please consult with a qualified tax advisor, CPA, Financial Planner or Investment Manager.