July 19, 2021

An Overview of Trust & Estate Planning

Here’s an overview of what you may need to know about trusts and estate planning.

You may think you don’t have a need for trust and estate planning or maybe you just haven’t had the time. Perhaps you think everyone in your extended family knows what you want to happen when you die. However, what if they don’t? Here’s an overview of what you may need to know about trusts and estate planning.

What are Trusts & Estates?

Trusts and estates are commonly used to aim to minimize estate taxes on all assets left to your loved ones after you pass away. They are also a viable way to help ensure that you are directing your legacy while keeping as much of your hard-earned wealth as possible.

Working with your Estate Planning Attorney, trust and estate planning should be designed to help you better map out your family’s financial future, all to help aim to ensure that your loved ones are always taken care of and protected.

What is a Trust?

Trusts are commonly used to aim to help minimize taxes and to set up your property and assets for your nominated beneficiaries. A trust acts as a fiduciary agreement made while you are still living that allows a third party (commonly referred to as a trustee) to hold assets on behalf of one or more beneficiaries. It is a way for people to take full control over their wealth and to aim to preserve as much of it as possible for future generations.

A trust is normally set up as part of the estate planning process to aim to ensure the assets and property held in trust are distributed properly to the named beneficiaries.

What is a Living Trust
A living trust is a legal document created during a person’s lifetime that allows for the easy transfer of their assets. It is designed to bypass the complex and expensive probate process. Any property transferred into a living trust while the person is alive doesn’t go through probate after death.

People in a Trust

The person who creates the trust is known as the grantor. The grantor is the owner of the assets and property held in the trust partially for income and estate tax purposes. The trustee retains the power to control and direct holdings in the trust, including income received from those assets.

A living trust designates a trustee to manage the assets that sit within the trust while the grantor is still alive. The trustee looks after the best interests of the beneficiaries as outlined in a trust agreement.

You can become the trustee of your own living trust, allowing you to keep full control over all assets and property held in the trust.

The trustee holds onto all the assets and property outlined within the trust on behalf of another person called the beneficiary or beneficiaries. The creator of the trust (grantor) designates who the beneficiaries are and appoints a trustee.

Why is a Trust Important?

A trust is important for many reasons that will vary depending on exactly what type of trust you are talking about. A family trust, for example, is an opportunity to both potentially minimize income taxes and to designate income splitting among family members of any revenue generated by a particular asset.

Who Needs a Trust?

Anyone who needs to exercise a greater level of control over their assets than what they could achieve with a general will can usually benefit from a trust. Likewise, trust planning may be beneficial for people who need to maintain privacy regarding their assets, for people who might want to protect their assets from creditors, and for many other similar reasons.

What is an Estate?

A person’s estate is the total economic valuation of all the assets and interests of an individual, including their investments. The estate includes a person’s personal effects, both physical and intangible. This includes land, real estate holdings, investments, collectibles, and household furnishings.

What is Estate Planning?

Estate planning services are all about aiming to find the best way to leave your estate (including as much of your wealth as possible) to your loved ones after you die. This is a larger process that includes trusts and wills, beneficiary designations, powers of appointment, powers of attorney, and others.

Components of an Estate Plan

The main elements of an estate plan include a will, a trust, healthcare power of attorney, and financial power of attorney.

A Will
A will is a legally-binding document outlining who will receive all your assets upon your death. Without a will, the state will determine how your assets and property are distributed.

A will appoints an executor (legal or personal representative) to carry out the wishes outlined in your will. Any property in trust, jointly-owned property, life insurance proceeds, and IRAs or 401(k) plans all pass outside of probate and aren’t covered under a will.

Power of Attorney
A financial power of attorney allows a person to delegate to someone else the ability to manage assets in your name. This includes retirement plans and any assets titled in joint names as tenants in common. A financial power of attorney can also be used to transfer assets into a revocable living trust if a person becomes mentally incapacitated before the trust has been fully funded.

Medical Care Documents
A Medical Power of Attorney is also called a Designation of Health Care Surrogate. This type of POA allows you to designate someone to make medical decisions on your behalf if, for any reason, you are unable to make them for yourself. It can also be used to designate someone to serve as your guardian or conservator in the event a court determines you have become mentally incapacitated.

Other Estate Plan Documents
Some people also provide a letter of intent. While the document might not be valid in terms of the law, its purpose is to define what you want to happen after your death or incapacitation. It may include what you want to be done with particular assets or to make special requests like outlining funeral arrangements.

Other Estate Planning Considerations
When designing an estate plan, there are additional considerations that one should take into account to guarantee a more holistic plan of action.

Protecting Your Children’s Property
It is important to name a trusted adult or corporate trustee to manage assets your minor children or grandchildren may inherit. This can be the same person named in your will.

Consider Life Insurance
Life insurance can help cover any debts or estate taxes when you pass away. It can also help support any young children you might have. Lastly, for certain estates, it may help in managing estate tax liquidity issues for illiquid assets such as real estate or businesses that cannot be easily liquidated.

Review Estate and Inheritance Tax Implications*
The estate tax is mostly imposed on assets left to heirs, but may not apply to the transfer of assets to a surviving spouse. In addition to federal estate taxes, some states have their own state estate and/or state inheritance tax. Be sure to proactively check for future legislative changes that might affect your estate (i.e. the proposed American Families Plan). Careful estate planning may help minimize estate and/or inheritance taxes.

Complex Or Blended Family Considerations
Your estate plan should clearly list individuals, such as your children, that you wish to receive assets and the amounts. Remember to take into account prenuptial, postnuptial, and blended family considerations when determining asset distribution.

Provide Access To Your Digital Assets
In today’s digital age your estate plan isn’t complete without a list of your digital assets. This includes any online accounts or services protected by log-in security. Make sure your “Out the Door Package” includes a list of assets including the full name on the account, web address, and any account numbers. Most states have adopted some version of The Uniform Fiduciary Access to Digital Assets Act which allows your executor access to your digital accounts.

Why is Estate Planning Important?

Estate planning is important because it is one of the most effective ways to examine someone’s financial needs and assets. It aims to help loved ones so that they are provided for in the best possible way after death. Unlike a will, which simply provides instructions for how your assets should be handled after you die, estate planning outlines your wishes in terms of your health, your personal finances, and more.

Who Needs Estate Planning?

Anyone who aims to make sure that their loved ones are taken care of should enlist the help of an estate planning professional. Estate planning is about aiming to protect those you leave behind – including from the Internal Revenue Service in terms of the estate tax and other financial obligations.

What to Look for in Trust & Estate Planning Services?

Complete and comprehensive planning. An expert should work with you to create an up-to-date plan that aims to guarantee that your legacy goals are properly in place before anyone needs to rely on them. Getting this information in place as soon as possible can be enormously helpful, especially if you should pass away unexpectedly.

How Churchill Management Group Can Help

Working with your Estate Planning Attorney, Churchill Management will help you implement an investment strategy that considers the various planned and unplanned events that could occur and impact your wealth. We can also help connect you with experts that will set up your estate to be preserved however you see fit. Working with your Estate Planning Attorney, we can manage your assets to help outline a clear path forward to achieving your legacy goals. Contact a financial expert today. See disclosure below.

Financial Planning Disclosure
Churchill provides financial planning services to Clients that specifically engage Churchill for that service. The planning can include defining goals, designing a plan, assisting with implementing the plan, and evaluating and adjusting the plan over time, at the request of the client. The financial planning includes advice regarding securities investing and may include discussions of a client’s tax, insurance, employee benefits, estate planning, and other issues. Churchill, however, does not provide legal, insurance, employee benefit, estate planning, tax, or accounting advice, and the client must rely on legal, insurance, and accounting professionals for that advice and documentation.

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