As every legacy is unique, there is not a “one size fits all” approach to the creation of an estate plan. With every estate plan, which might include one or more trusts, understanding the goals of the family or business is critical.
It is also important to remember that goals and personal circumstances can change throughout the lifecycle of an estate plan. Revisiting your plan frequently is important. And, as you review your estate plan, you might find yourself asking—why establish a trust?
Below are some examples of different stages people may find themselves in and when a trust might work for them:
A trust can offer protection
This benefit of a trust is often the entrance point for people who realize they need to consider creating a trust. This can occur when an individual or business owner begins to identify the need for strategic planning to ensure the safety of his or her finances, the continuity of financial management, or the long-term success of a business.
The first step is to identify the goals of the estate plan and, if necessary, to achieve those goals, consider establishing a trust. During this phase, working to identify business or other asset growth potential and establishing long-term planning is key. Through this initial process, the foundation is laid for adjustments that may be needed as goals shift or change over time.
By working with individuals to define their goals, such as business or other asset growth, tax savings, or a gifting strategy, substantial amounts of money might be saved by using a trust as part of the plan. This is also a point where individuals, along with their financial advisors, may decide to create a trust that cannot be changed.
A trust can ensure a legacy
A trust can help establish a legacy that may last for generations. Setting up trusts for children or grandchildren who may be too young to manage finances for themselves—or establishing a process for distribution of wealth over the long term— is often a strategic step in building meaningful inheritance plans.
This is also the time where, if possible, some start thinking about setting up a foundation or establishing gifting strategies to charities. There are many factors to consider that stretch far beyond finances; for example, trusts can be established for fine art pieces and collectibles as well.
A trust can support peace of mind
As individuals move into the latter phases of their financial lifecycle, questions about personal security and financial stability can begin to arise. This often starts when people are nearing retirement. They have planned for their legacy and feel financially comfortable. However, now that retirement is closer, they wonder, “Am I going to be able to continue living the life I am used to?” Trusts can work to ensure that retirement is properly funded and individuals can continue living the lives they are accustomed to with the money they have.
Additionally, a trust can provide peace of mind for individuals and their families by ensuring that bills can be paid and investments managed even in the event of disability. Living trusts (trusts that can be revoked during lifetime where the trust creator serves as the trustee initially) can be beneficial as people age, especially if they become mentally or physically impaired. A living trust can also help relieve family burden and ensure a smooth transition when an individual dies or becomes incapacitated by naming a successor trustee to step in and continue to manage the trust.
Estate planning is critical to establishing a legacy and helping achieve an individual’s dreams and goals. UMB Private Wealth Management recommends reassessing your estate plan at least every five years, or sooner if major life changes have occurred, to ensure the plan is working to meet individual needs and reflects current life circumstances. There are many different types of trusts that can be established for your individual needs. Let UMB work to find a unique solution for you.
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