One of the most useful and flexible wealth management tools is the revocable living trust. Traditionally, we like to point to three basic benefits that these trusts offer.
Professional asset management. After studying your goals and circumstances, our asset-management specialists will map out a diversified investment program appropriate to your needs. Our objective is not only to add to your financial security, but also to give you more opportunity to enjoy it.
Uninterrupted family financial protection. A living trust agreement can instruct us to perform a wide variety of special tasks when the need arises. With proper planning, living trusts can do much to avoid the financial management problems that arise during a prolonged period of incapacity—problems that might otherwise have to be dealt with by a court-appointed conservator.
Probate avoidance. Assets placed in a living trust avoid probate because these assets are removed from your “probate estate”—the estate controlled by your will. Trust assets will be distributed to beneficiaries or held in continuing trust, as you direct in the trust agreement. Thus, using a living trust as the core of an estate plan usually leads to reduced settlement costs. More importantly, it avoids delays.
Living trusts can do more, however. Noted estate planner Martin Shenkman explored new perspectives on trust benefits in an article in a professional journal last year [“How to Avoid Complicated Trust Issues,” Bank Investment Consultant]. Among the emerging benefits, he pointed out:
Minimizing identity theft. The problem of identity theft has exploded in recent years. A funded revocable trust may have its own tax ID number, rather than using the settlor’s own Social Security number. In the event that the settlor’s Social Security Number is compromised, the trust assets still will be protected.
Protecting aging retirees. More and more retirements are lasting longer than 20 years, and more and more elderly are developing some level of cognitive impairment. A living trust can provide for successor trustees as the beneficiary’s abilities decline. Checks and balances are built into the plan, in the form of co-trustees or trust protectors. A care manager plan also might be included, to provide annual or quarterly assessments of how the beneficiary is doing.
Serving disabled loved ones. A revocable trust may contain special-needs language to provide for an ill relative or incapacitated adult child. The trust also may provide for successor trustees should the caregiver become incapacitated.
Asset protection in divorce. If gifted or inherited assets are segregated into a trust, they will not be commingled with other marital assets. As such, those assets will not be vulnerable in a subsequent divorce proceeding.
Regardless of the decline in estate planning attributable to the increase in the federal exemption from estate taxes, attorney Shenkman predicts that the traditional and emerging benefits associated with revocable living trusts will make them an essential part of late-stage life planning for years to come.
To get started
To set up a living trust with us, you give us your instructions in a trust agreement, prepared by your attorney, and legally transfer the stocks, bonds, investable cash or other assets into your trust. Because the trust agreement is revocable, you can cancel the arrangement if ever you find it unsatisfactory. You also remain free to add assets, withdraw assets, or modify the terms of the trust at any time.
While resourceful management and responsive financial services cannot eliminate all threats to financial security, the wise planner will be way ahead of the game should an issue arise. The Trust and Investment Division of Texas Bank and Trust would be happy to assist you in your preparations.
Amelia N. Proctor, CPA
Senior Vice President and Business Development Officer at Texas Bank and Trust
With more than 20 years of trust, financial services and banking experience, Amy Proctor has served in many roles, including Chief Financial Officer, Investment Portfolio Manager, Financial Advisor, and Commercial Lender with various financial institutions.
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