Planning for Your Family’s Financial Future: The Family Trust
If you care about your family’s financial future, you undoubtedly know the importance of financial planning. While often difficult and sometimes emotional, proper and careful planning can make the difference between protecting your family’s assets or seeing them fall victim to taxes, creditors, divorce, or bad investments.
One of the safest mechanisms for wealth protection is the family trust. But how does one create a family trust? And how does one find the best person to manage your family trust?
Family dynamics are often complex and a family member may not be the best choice for managing your trust. Most often a professional trustee, a neutral third party, is the much better choice.
A professional trustee can protect your family’s assets and ensure that the wealth you have accumulated can become generational wealth that can benefit your family for years to come.
It’s important to take the necessary time to select, not just the most qualified trustee, but also the right trustee for you and your family. Make sure that you and your family get along with the trustee and make sure you feel comfortable. Once you find a trustee that you like, you will be able talk with them and share with them exactly how you want them to manage your trust. You can include specific instructions for them in the trust documents.
In many cases, your family lawyer will be able to help you select the qualifications of your trustee.
The Importance of Establishing a Trust: Why You Need One
As mentioned earlier, a trust can protect your family wealth from taxes, divorce, creditors, or bad investments. Detailed instructions in the trust documents that describe how you want the assets invested or managed is crucial to ensuring that your trustee knows what you want him to do so he can carry out your plan.
A trust helps your family avoid inheritance tax. While the IRS does allow individuals a certain amount of money that is excluded from inheritance tax, there is a limit to the amount of money that can be passed from generation to generation without tax liability. A trust, because the money is held by a fictitious entity, incurs no tax liability when you die. The beneficiaries of the trust receive the benefit of the money held in trust and there is virtually no limit to the amount of money that can be passed forward to your beneficiaries.
A trust also helps you avoid financial liability in the case of divorce. Since the trust owns the assets it contains, the assets do not represent marital property. In the event of a divorce, because you entered into the marriage without owning the assets contained in the trust, your spouse has no legal claim to them. When the marriage ends, the trust still holds the assets and you still hold the beneficial interest.
A trust is also a good idea when it comes to creditors. Once you create a trust and your children (or other assigns) become beneficiaries of that trust, the assets in the trust are protected from any creditors that may be owed money by the beneficiaries. If any of the beneficiaries of the trust have financial challenges, any of the creditors cannot touch the assets in the trust. The assets in the trust are protected from financial actions of the beneficiaries.
When it comes to investing the assets of the trust, only the trustee is able to do so. The beneficiaries are unable to directly invest the assets. They are, however, able to invest their own funds. If they do so and the investment turns out to be less than favorable, the assets of the trust are protected. A good trustee will invest the assets of the trust, with the help of professional investment counselors, and ensure that the investments are prudent and suitable for the goals set forth in the trust documents.
At The Trustee Group, we do not handle investments directly. We believe this to be a conflict of interest for an acting trustee. Instead, we will work with your existing financial professional(s) or we will bring in a qualified investment professional to work on the trust’s behalf.
Family Members and Friends Are Not Necessarily the Best Trustees
It may be tempting to appoint a spouse, child, or other family member to manage your trust. You may trust your spouse with your most intimate secrets and you trust them with your assets. Why not trust them to be the trustee?
Spouses, children, step-children, and other family members, while they often have the best intentions, don’t always have the necessary qualifications and skill sets needed to act as trustee over the family trust.
Just because your family members will eventually become the beneficiary of the trust doesn’t mean they have the knowledge, expertise, or experience to take control and manage the family trust. They may not even have the interest or inclination to do so.
You may think that a family member or close friend might be a good choice for trustee. In reality, unless they are a professional administrative trustee, they most likely will not be the right choice to manage your trust.
The trustee you select must be someone you trust implicitly, someone you feel comfortable with, and someone with an understanding of what you want them to do for you.
The trustee must be an expert in managing the type of assets that embody your trust.
It is a much better idea to find a professional trustee with the right experience, licenses, and credentials, specifically a licensed Private Professional Fiduciary and a National Certified Guardian.
What It Takes: The Characteristics of a Professional Trustee
It is impossible to overstate how important it is that the trustee be the right person; so in choosing that person, here are some guidelines to keep in mind.
Your trustee is responsible for carrying out your wishes when it comes to the trust you create. Your trustee works for the trust, but is hired by you. They must be well-versed in handling complex family relationships and be able to disperse beneficial distributions. They must understand accounting, tax filing, and investments. They must have relationships with other professionals in these fields and be able to use these relationships to ensure your trust has the expert advice that will benefit it the most.
Regardless of whether the assets in your trust include your home, businesses, real estate, personal property, contracts, insurance, investments, charities, or funds, your trustee will be responsible for them all.
The right trustee for you must be able to handle any family issues that might come up including acting as a referee if necessary. They must be able to mentor the younger generation for access to the family wealth. They must be able to protect, nurture, and grow the assets of the trust.
Hiring Your Trustee: Don’t Let Short Term Cost Prevent Long Term Benefit
The two most common impediments that prevent people from hiring a trustee are the cost of hiring a professional administrative trustee and the perceived lack of control over the assets contained in the trust.
Each of these are valid concerns that need to be addressed before hiring your trustee. Both can be addressed by hiring The Trustee Group.
While there is a cost associated with hiring a trustee, that cost is much smaller than the risk of not putting a qualified professional in charge of your assets.
The expense of creating the trust and retaining a professional trustee will be much less than the potential liability and legal fees that may result from not protecting the family assets with a trust.
The Trustee Group: The Trustees You’ve Been Looking For
Now that you know what you are looking for in a trustee, it’s time to contact The Trustee Group. We are a full service trustee and successor trustee company. Our trustees are licensed Private Professional Fiduciaries and National Certified Guardians. We have decades of experience managing and growing a variety of businesses and portfolios. Because we have a full office staff, we are able to focus on our clients and the trusts we oversee.
We have over fifty years of combined experience administering homes, businesses, assets, and trusts for the courts. We have the credibility, experience, and know-how to properly manage your trust.
The Trustee Group has a team of trained professionals that enable our trustees to properly administer your family estate. Many trustee companies are one-man shops, not us. Our main office is in Los Angeles and we have offices in San Francisco, Phoenix, and Las Vegas. Our staff includes home administrators, project managers, chief executive officers, chief financial officers, attorneys, technology experts, accountants, and administrative staff.
The Trustee Group has the people and resources to properly and effectively administer your trust.
For more information about The Trustee Group and hiring us to manage your trust, use this form to contact us today or call now 310.552.5315.