If you’re concerned about the control and distribution of your assets after you’re gone, consider creating a trust as a helpful estate-planning tool.
When it comes to estate planning, there’s a good chance you’ve thought about a will and even insurance, as well as who should get your retirement account if you pass. But have you thought about including a trust in your estate plan?
By setting up a trust fund you can steer your assets to work on your behalf before you pass on and ensure that they’re distributed the way you want afterward—while avoiding some of the hassles and costs that come with probate and taxes.
“Trusts can be complex, so before you set one up, you should speak with someone knowledgeable about estate planning and trusts,” says Robert Siuty, senior financial consultant at TD Ameritrade. “But there are some general things to help you decide if a trust could be a good addition to your estate plan.”
A trust is a legal entity separate from you. It’s designed to hold assets, keep them safe, and then distribute them in ways you designate. There are many different types of trusts, and each comes with different rules that govern how they’re set up and used.
According to Siuty, “It’s a good idea to know how you want to use the trust. Figure out if you want the trust to operate while you’re alive, whether you want to be able to make changes to it, and whom you want to benefit from it later.”
Once you have an idea of what you want to accomplish with the trust, Siuty suggests working with a professional to actually complete the paperwork and put the trust into effect. It’s important to work with a knowledgeable professional, he says, because many of your assets will be kept in the trust, and there are some types of trusts that you can’t change once they’re formed.
Not every trust operates the same way, but Siuty points to some fairly standard advantages that come with forming a trust and using it to pass your assets on.
“In many cases, a trust can keep the bulk of your estate out of the court system after you pass,” says Siuty. “With a trust, assets remain intact and the beneficiaries get access.”
If you’re concerned about the probate process and what it might do to your estate, setting up a trust fund can help with a smooth transfer of your assets to your heirs. You can set up your trust to designate which beneficiaries receive assets and when.
According to Siuty, “In some circumstances, it’s possible to reduce or even eliminate some of the estate taxes that follow a death." He points out that it’s important to work with an estate-planning attorney and a tax attorney to figure out the best way to structure a trust to reduce estate taxes. You might not be able to eliminate all taxes. A knowledgeable professional can help you navigate your choices.
If you have a disabled or special needs child or you’re concerned about minor dependents, a trust can provide ongoing support. There are also trusts that can help you pass your assets on to charities. A trust can help you effectively provide for the future well-being of your heirs—without some of the costs and difficulties that come with having everything pass through probate.
“As the owner of the trust, you can set conditions for beneficiaries and designate trustees to oversee the assets,” Siuty claims. “A trust can help you control your legacy beyond what’s possible with a will.”
You can also designate what happens if a trustee becomes disabled or incapacitated. The trust designates the successor trustee (or more than one). It’s possible to set conditions as well. In short, a trust gives you greater say in what ultimately happens to your money, even after you’re gone.
Whether you should set up a trust depends largely on what you hope to accomplish. If you’re looking for a way to pass on your assets without dealing with probate, and do so in a way that reduces taxes on your estate, a trust can help. A trust can also be a good tool for providing for disabled adult children or others.
“When you’re looking at overall wealth management and financial planning, you want to do more than just look at your budget and expenses and asset placement,” Siuty concludes. “You also want to look at what happens to your assets after you’re gone, including what can help them remain intact and do the most good.”
Use this checklist to help make sure your estate plan wishes are known and necessary documents are in place.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC, and a subsidiary of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of the Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2020 Charles Schwab & Co., Inc. Member SIPC.