Category: Elder Law




Baby Boomers, the country’s wealthiest generation, are expected to transfer $30 trillion to Gen Xers and Millennials over the coming decades. This means millions of young people will, expectedly or unexpectedly, come into significant wealth. Trusts are extremely useful estate planning tools for those looking to preserve and transfer assets, despite their negative connotation in the public consciousness. Trusts have a myriad of tax and non-tax benefits.

Deciding whether a Will or Trust is best for you is an important start to your estate planning.

Let’s understand the basic differences between a Will and a Trust:

Wills: A will is a legal document that directs the distribution of assets after death. Wills are subject to probate, or the court-supervised collection and distribution of assets.

Trusts: A trust becomes valid upon execution. You can place any number of assets into the trust, including cash, stocks, or real estate. In the case of an irrevocable trust, once you place the assets in the trust, you lose control of the assets, which then fall under the care of a trustee, such as a bank or attorney.

Let’s remember that NEITHER A TRUST OR A WILL IS EFFECTIVE NOT DONE CORRECTLY. For example, if the designation of beneficiaries under your IRA, 401k, 403b, life insurance, annuity, etc. does not match the terms of your Will or your testamentary intent, your Will may be ineffective. If your trust is not properly funded, then it will do nothing to ensure that your assets are administered according to the terms of your trust.

Trusts have many added advantages. When executed properly, most trusts will avoid estate and gift taxes, as well as probate. Trustors can also set stipulations for use of a trust, like restricting distributions to purchasing a home or financing education. Trusts can also help clients:

  • Ensure a child’s inheritance is properly managed

  • Ensure homes are transferred to designated beneficiaries in the event of death

  • Keep a business in family hands throughout generations

  • Protect family assets in the case of future divorces

  • Maintain privacy of assets since trusts are not public records

Incentivizing achievement

Many parents, regardless of wealth, worry about spoiling their children. For those parents who have amassed great wealth, the concern often boils down to wanting to leave enough wealth so children can live productive, meaningful, and comfortable lives, but not so much wealth that the children choose to do nothing. While trustors will want to give their beneficiaries every opportunity, trusts can be crafted in a way that incentivizes education, hard work, or other desirable behavior.

Incentive trusts impose restrictions on distributions. For example, an incentive trust might require beneficiaries to graduate from college or even achieve a certain grade point average in order to receive money from the fund. They could require employment or charitable work, and reduce or cut off distributions for beneficiaries who fail to meet the requirements.

Incentive trusts have become increasingly common, but they’re not without their drawbacks. A trustmaker may not foresee all future problems, including medical emergencies or financial hardships, which might affect the trust’s stipulations and require greater financial distributions. Designing these trusts effectively requires careful listening and understanding of the client’s situation so that the incentive trust will work to further the client’s goals.

Regardless of your level of wealth, trusts are a useful tool for facilitating control of assets.


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