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Simplifying life with complex financial strategies

So say you want to pass your assets on to your daughter at your death, but she is married to a gentleman you generally consider to be a louse.

You and your own spouse have no interest in lining his pockets with your hard-earned life savings, so a simple will simply will not suffice to ensure that your wishes are carried out.

Now imagine for a moment that you have four children, all of whom are under the age of 18 and who enjoy the simple pleasures of life, like instigating their other siblings into disagreements that often escalate to an occasional fist-fight. Simply listing the children as beneficiaries on your accounts in no way encourages them to continue to “play nice” when you’re no longer around to referee.

Or maybe you want to reduce your personal tax liability by getting fast-appreciating assets out of your name, yet keeping them under your control.

When grappling with proper estate planning techniques to achieve these and similar goals, you simply need to remember one word: Trust.

Basic trust

Trusts and the estate-planning strategies that use them as tools to achieve some of the goals mentioned above can prove to be infinitely complex entities. So complex, even, that there are entire schools dedicated solely to training students about the intricacies of these instruments. Let’s review just a few key points about how trusts themselves work and what they are.

A trust is an entity that can hold many different types of assets, including real assets for the benefit of one or more designated beneficiaries. Types of assets often held in trust include securities (stocks, bonds, etc.), cash, insurance policies, real estate, and even artwork.

Talking terms: Who does what?

The person who creates and then funds the trust is called the “grantor,” and it is this person who normally chooses the people or other entities that will benefit from the assets held in trust. There are many various types of trusts that can be used to address the certain specific needs identified by the grantor and, commonly, those needs can include the distribution of income to beneficiaries during the life of the trust or the distribution of principal to beneficiaries either during or at the end of the life of the trust.

The “trustee” of the trust is tasked with overseeing management of the assets inside the trust in order to meet the goals of the strategy as defined by its documents. A trustee administers the trust, manages the trust and carries out the requirements for distribution of principal or income in accordance with the trust agreement.

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