Trusts – The Swiss Army Knife of Estate Planning

Gabriel Katzner - April 19, 2019 - Estate Planning
Trust Funds

The word trust or “trust fund” is often wrongly associated with great wealth and the kinds of financial tools that most of us will never need to use. But this association is grossly mistaken. The truth: A trust is nothing more than a functional, effective estate planning device that can help any one of us ensure that our wishes are carried out when we’re no longer able make decisions on our own.

The process begins when the person establishing the trust—often called the grantor, settler, or trustor—transfers ownership of money or assets into the trust. Another person (a trustee) is assigned to the management of these assets for the benefit of a third party, the beneficiary of the trust. In a revocable living trust, the person who sets up the trust holds all three roles as long as he or she is alive. After the person’s life ends, the trustee takes over thereby providing for a way to transfer assets to the ultimate beneficiaries without the need for probate court involvement.

Different Types of Trusts

If you decide to set up a trust, you’ll have several options from which to choose.

  • Revocable Living Trusts. This common type of trust can form the foundation of your estate plan. If you pursue this option, you’ll create clear instructions on the handling of your assets, which will go into effect when you die or become incapacitated. As long as you are alive, you can cancel or change any of your provisions.
  • Incentive Trusts. This kind of trust will contain provisions designed to encourage certain behaviors. In order to receive benefits from the trust, your beneficiaries must follow these behaviors.
  • Beneficiary Controlled Trusts. In some trusts, the beneficiary and the trustee may be the same person. In this case that person (often a child or grandchild) can distribute assets to him or herself for specific purposes like health or education. This trust may also involves a co-trustee to provide an additional level of asset protection. The beneficiary can remove this person if he or she chooses.
  • Asset Protection Trusts. This type of trust provides protection against lawsuits and creditors. Sometimes the person establishing this trust is also the beneficiary, so if this means you, you’ll be able access the funds, but your creditors won’t. This kind of trust must be carefully set up and competently managed with appropriate protective legal language.
  • Offshore Trusts. An offshore trust is typically set up in a jurisdiction where the laws allow types of privacy and asset protection not available in the United States. The jurisdiction must of course recognize the legal aspects of a trust, but since US laws may not apply to other aspects of the agreement, these kinds of trusts typically bring close legal scrutiny and strict US reporting requirements.
  • Life Insurance Trusts. This irrevocable trust is usually set up for one purpose: to own a life insurance policy and, assuming other requirements are met, keep that asset out of your taxable estate upon your death. The trust can purchase the policy directly, or a policy that the grantor already owns can be transferred to the trust. The settlor cannot serve as the trustee in this case, and he or she cannot dissolve or change the trust in any way. If you have a large life insurance policy and your estate is subject to estate taxes, this may be the right trust option for you.
  • Testamentary Trusts. This trust goes into effect only when the grantor dies, and the provisions of the trust are usually included in the person’s Last Will and Testament. The downside of a testamentary trust is probate.

Seek Professional Advice

Choosing a trust and creating an estate plan may seem complicated, or out of reach if you don’t see yourself as “wealthy”. But this is far from true. Get the help and guidance you need by contacting our office and sitting down with our estate planning team.

You can use the link below to schedule a call with Gabriel Katzner, or just call us at 855.528.9637 to learn more about how best to plan today to protect those most important to you:




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