This is the conversation that will make a difference in the lives of those you love. We’ll unravel the ambiguities surrounding assets, beneficiaries, and protection from unnecessary estate taxes.
- Talking about trusts can be confusing; and not talking about them can be devastating.
After working a lifetime to build an estate, it’s natural to want the right to:
- Determine what happens to your assets
- Protect them from unnecessary estate taxes
These are the two primary reasons for establishing trusts.
Let us help you in answering these most frequently asked questions about trusts:
- How do you know if you need a trust?
- How do trusts work?
- How are trusts set up? How much does one cost?
- Who should serve as trustee?
There’s absolutely no reason to feel uncomfortable about not understanding the terminology or technicalities of trusts.
Few people understand them until they discover they need one … and by then it may be too late.
That’s our job – to help you better understand the reasons for trusts and the process involved in establishing them.
- What Is a Trust and What Types are Available?
- A trust is a legal agreement between two parties, the person who creates the trust and the person, institution or independent trust company responsible for administering the trust, the trustee. The trustee manages the assets placed in the trust for the benefit of a third party, the beneficiary.
What Type of Trust Do You Need?
An overview of some of the types of trusts available:
Personal Trusts
Personal Trusts may include Revocable Living Trusts, Irrevocable Trusts, Life Insurance Trusts, Special Needs Trusts and Charitable Trusts.
Revocable and Irrevocable Living Trusts
A living trust is created during one’s lifetime. A Living Trust provides the assurance of knowing that loved ones are provided for. It allows assets to be distributed quickly and quietly without lengthy court proceedings. A Living Trust can also greatly reduce settlement costs and estate taxes. A living trust, as the name implies, is a trust that is created during one’s lifetime. Unlike a will, a living trust avoids probate and does not become a matter of public record.
A Living Trust may be appropriate for:
- Clients who want the assurance of knowing that loved ones are cared for.
- Clients who want assets distributed quickly.
- Clients who want private and quick court proceedings.
- Clients who want to greatly reduce settlement costs and estate taxes.
A revocable living trust allows the person who creates it to retain total control over it by retaining the power to cancel or change the terms of the trust or to terminate it any time. The trust can be changed if circumstances warrant.
An irrevocable trust cannot be changed or canceled. This type of trust is usually set up to provide tax savings, asset protection or some other benefit important to the person who creates it.
- Who Needs a Trust?
- Not everyone needs a trust, but most people should consider one. Trusts aren’t just for the affluent. Setting up a trust is an excellent way to control what happens to your estate, regardless of its size, to possibly reduce estate taxes and protect against the expense and aggravation of probate.
More than two million U.S. taxpayers have established trusts. Those who benefit most are married couples with net estates exceeding $4 million and single people with net estates exceeding $2 million; however, under the current tax law, these amounts will increase over the next several years.
The net value of an estate can be determined by adding the market value of all assets, including real estate, personal property, businesses, bank accounts, investments, IRAs or other retirement benefits, and life insurance, then subtracting liabilities.
Unlike wills, trusts are not subject to probate and therefore allow you to keep your affairs private.
- Will or Trust?
- Most people need both. A big advantage of a trust is that it is generally the best strategy to avoid probate and protect financial privacy.
Wills must be validated by probate court, a lengthy and expensive process that can take six months to two years and, in some cases, even longer. Probating a will may involve attorney’s fees, executor’s commissions, administrative and other court costs. Unlike wills, trusts are not subject to probate and therefore enable you to keep your affairs private and minimize settlement costs and estate taxes.
- FAQs about Trusts
- Why Set Up a Trust?
There are many reasons to set up trusts. Married couples often realign the ownership of their assets to save substantial federal estate taxes and pass more on to their heirs. Rather than owning assets jointly, they choose to own assets individually so that they can each take full advantage of the increasing unified credit amount. Preserving each spouse’s unified credit can save hundreds of thousands of dollars in estate taxes.
If the time comes that you are no longer able to handle your own affairs, trusts can ensure that there will be someone who is experienced and objective to “mind the store.” If there is a serious illness or disability, a trust ensures that a plan is in place to take care of your needs and those of your loved ones.
When the trust is managed by a full-service trust company, other professional services can be provided, such as bill paying.
Business owners can use trusts to save on estate taxes when passing along businesses to heirs.
Trusts are also useful for blended families with spouses or children from previous marriages. The trust can spell out exactly how marriage affects the inheritance of children or grandchildren from a first marriage.
Naming an independent trust company removes the emotional element often associated with friends or family members.
Who Sets Up a Trust?
Usually, attorneys draft trusts.
What About Fees?
Generally, fees for trust services are spelled out in the trust document. Under normal circumstances, they are calculated annually, based on the level of responsibility assumed by the trustee and the value of the assets in the trust. Fees are charged quarterly or monthly and a portion may be tax-deductible.
How are Trust Assets Invested?
Ultimately, it is the purpose of the trust that determines how the assets are invested, and it is the responsibility of the trustee to see that the purpose is carried out. Often, the person who creates the trust will name a professional investment manager to work with the trustee and make investment recommendations based on the goals of the trust, the needs of the beneficiaries and the time horizon.
How Does One Choose a Trustee?
Many people prefer to name an independent trust company to handle their affairs. Trustees who don’t deal with trusts on a regular basis can be overwhelmed by the duties required of them. Also, naming an independent trust company removes the emotional element often associated with friends or family members and assures that your wishes are fulfilled exactly as they are spelled out in the trust. Choosing a trustee to manage your personal affairs could be one of life’s most important decisions. Everyone wants the assurance of knowing they are dealing with a highly ethical, established firm that will provide them with clear guidance and respect their wishes.
- What Makes the Team of IFS and Raymond James Different?
- At IFS, we are proud to offer the trust services available through Raymond James Trust. Raymond James Trust offers complete personal trust services, including serving as trustee or as an agent or custodian for individual trustees. They also serve living trusts, charitable remainder trusts, life insurance trusts, specialty trusts and IRA rollover trusts. Today, Raymond James Trust manages more than $2 billion in assets for trust clients.
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- As trustee, Raymond James Trust offers:
- Professional management by trained experts
- Impartiality in making investment decisions and in dealing with your beneficiaries
- State-of-the-art technology to serve our clients better and faster
- The confidence that comes with knowing all transactions are subject to regular audits by external auditors and government regulators
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- Additional Services provided by Raymond James Trust:
- Safekeeping your trust’s assets
- Collecting interest and dividends payable
- Attending to maturing bonds, stock splits and tender offers
- Executing security transactions through our Financial Advisors
- Maintaining accurate records
- Providing periodic account statements and investment performance reports
- Making payments, distributions and remittances to the beneficiaries
- Providing income and intangible tax information to your tax advisor
Raymond James Trust N.A. is a wholly owned subsidiary of Raymond James Financial, Inc. (NYSE-RJF) which provides financial services to individuals, corporations and municipalities.
Under its federal charter, Raymond James Trust N.A. may act as trustee, custodian, personal representative or agent to the trustee in a wide variety of trust and estate situations in every state of the U.S.
Let us know how the team of IFS and Raymond James Trust can help you. Call us today!
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- Trust Terms and Glossary
- Beneficiary
A beneficiary is the person, institution or organization that receives the proceeds from a trust or from an insurance policy when the insured dies.
Charitable Remainder Trust
A charitable remainder trust is an irrevocable trust that enables an investor to give highly appreciated assets to his or her favorite charity and still derive lifetime income and enjoy tax advantages.
Net Estate
Net estate is the sum of the market value of an individual’s assets, less liabilities. These assets may include real estate, personal property, businesses, bank accounts, investments, IRAs or other retirement benefits, and life insurance.
Life Insurance Trust
A life insurance trust allows the trustee to purchase a life insurance policy with the person who owns the estate as the insured and the trust as the owner. Usually, the trust is also the beneficiary of the policy. The proceeds from a life insurance trust are often used to pay taxes, legal fees, probate costs and other liabilities when the person who created the trust dies.
Revocable/Irrevocable Trusts
A revocable trust is one that can be revoked or amended by the person who creates it. An irrevocable trust may not be revoked or amended.
Trusts
A trust is a legal agreement between two parties, the person who creates the trust and the trustee, who may be a person, an institution or an independent trust company.
Trustee
A trustee is the person, institution or independent trust company managing the trust. A co-trustee manages a trust in cooperation with a family member or someone else.
Source: Raymond James
and CFP® 
in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements. 
