Historically, trust accounts have been viewed as investment tools for high net-worth individuals—but more and more, trusts are being reconsidered as the multi-useful estate planning tools that they are. Many investors benefit greatly from the establishment of trust accounts, even investors who may not think of themselves as being particularly affluent.
Does this mean that trust accounts are right for everyone? Not necessarily—but everyone who has assets to leave as part of a financial legacy should at least think about them, and talk about them with a financial advisor.
The Value of a Trust
There are several specific ways in which trusts can be potentially helpful:
Privacy. When a person dies, his or her estate typically goes into probate, which means it is made available for public scrutiny. Assets within the estate may therefore be used to pay off creditors. If assets are held in different states, the estate will go into probate in each of these states, leading to a potentially high and undesirable level of public interest in the estate—to say nothing of the high cost of probate. But with certain kinds of trusts, an estate can be kept out of probate and out of the public eye.
Taxation. There is much that could be said about trusts and taxation—too much to say here, in fact—but suffice to say that different types of trusts have different tax advantages. Trusts can often generate savings on transfer and income tax, including the potential avoidance of all transfer taxes.
Customized distribution. As the leaver of a legacy, you may have specific thoughts about how you want the assets to be distributed; likewise, beneficiaries may have their own unique needs. With a trust, you can potentially earmark certain funds for education, set up intervals of distribution, or do whatever else you think is best for your estate and its beneficiaries.
Strategy. Trustees have a fiduciary responsibility—under law—to ensure a prudent investment strategy, and trust management tends to happen in conjunction with financial professionals. All of this provides a certain peace of mind in how trust funds are invested.
Charity. With a trust, you can potentially leave a financial legacy to a charity or cause of your choice, even to one that is not your “heir” in any familial sense; you can dictate where and how your assets are donated to non-profit causes.
Talk with a financial advisor about how trusts can potentially help your estate planning. Contact Stonepath Wealth Management to set up your appointment today.
