Many of us prepare for the future through savings, investments, and retirement accounts — all of which are important. But have you considered adding estate planning to your wealth management checklist?
An estate plan is not just for ultra-wealthy people. If you want to distribute your property, vehicles, savings, and other assets according to your wishes, you should consider an estate plan.
Some people mistakenly believe that writing a will covers all of their wishes after their death, but this is not true. An estate plan consists of several parts, including your will and testament, advance health directives, and, in some cases, a trust.
What is a Trust?
Your will is a legal document, so think of your trust as its financial partner. Trusts allow you to allocate your finances and assets in the manner and timing you desire them to be distributed.
Three parties are involved in every trust: the grantor, the beneficiary, and the fiduciary or trustee. If you’re the person establishing or funding a trust, you are the grantor. The recipients who will eventually benefit from or receive the assets you place into the trust are the beneficiaries. The trustee is the third-party responsible for administering the trust according to the grantor’s directive stated in the trust.
A trust has several important purposes. They include:
- Ensuring your assets are managed and distributed according to your wishes
- Offering potential estate tax advantages
- Providing for family members and loved ones in the event of your death or incapacitation
- Protecting certain assets from creditors or legal proceedings (like lawsuits or divorce)
- Preventing beneficiaries from mismanagement of the assets they receive
- Leaving a financial legacy for your family or community
Depending on your assets and your wishes, you may want to consider adding a living trust or a family trust to your estate plan.
Living Trusts
Despite there being many kinds of trusts, living trusts are a popular choice in estate planning. They differ from other types of trusts in that they allow you (or a chosen trustee) to manage your assets during your lifetime and distribute them to your beneficiaries after you die.
You can decide which assets you’d like to include in your living trust. You will retain access to your assets and have autonomy over them for a lifetime. In many cases, you can act as your trustee regarding living trusts.
When you choose to establish a revocable living trust, you can redistribute assets or change your beneficiaries at any time. In contrast, an irrevocable trust generally requires agreement from the grantor, trustee, and beneficiaries to make changes once the trust has been established.
Family Trusts
Not all living trusts are family trusts, and not all family trusts are living trusts — but the two categories do experience frequent overlap. In simple terms, a family trust means that family members are the beneficiaries of the trust.
You can establish a family living trust, or a testamentary trust. A testamentary trust takes effect upon your death, allowing a trustee to manage asset distribution on your behalf according to the trust provisions. This type of trust does not avoid probate.
Which Type of Trust Do I Need?
There is no one right way to establish a trust — various trust types exist to meet different needs. As you decide, consider these factors:
Cost
Testamentary trusts are generally dependent upon the terms of your will and testament, while living trusts require additional documentation and planning which could incur more upfront costs. However, some people find the control and flexibility make a living trust their more attractive option.
Control
Some people wish to establish a trust during the initial estate planning process and leave it alone, while others want to retain the freedom to unilaterally change their asset distribution down the road. If you choose to establish a trustee to manage your trust, they will make decisions on your behalf. Keep in mind that they do have a fiduciary responsibility to act in the best interest of yourself and your beneficiaries.
Flexibility
If you know you want to establish a trust, but you may want to change beneficiaries or redistribute the assets within it at a later date, you may want to consider a revocable trust. This allows you to retain autonomy over decision-making in the future. If you’re certain of your asset allocation and beneficiaries, an irrevocable trust is a good option.
A Trusted Estate Planning Partner
Creating an estate plan and selecting the proper trust for your needs can be complex. As you prepare for the future, it’s important to find a local financial professional you can trust. While Marietta Wealth may help with considering your estate planning documents and discussing objectives, the actual execution of them should be done with a qualified attorney which Marietta Wealth can help find.
At Marietta Wealth, we’re here to help you navigate the expected and the unexpected when it comes to your finances. We have a fiduciary obligation to our clients and deliver customized wealth management services that prioritize your needs and goals.
Our team of experienced professionals would love to help you prepare for a sound financial future and provide you with peace of mind regarding your estate plan. Get in touch with us today — we’d love to meet you.
Marietta Wealth is a registered investment adviser. Registration of an investment adviser does not imply any level of skill or training. For additional information about Marietta Wealth’s financial planning and advisory services, please see the Marietta Wealth Disclosure Brochure or ADV Part 2A for full details, which is available upon request or by visiting our website.
This article is not intended to be used, and should not be used, as the sole basis for legal advice. The reader should seek and rely upon the guidance and advice of legal counsel before making decisions regarding any estate planning tools or documents.