How Can I Use a Personal Trust To Help Prepare My Family for Inherited Wealth?
Hi. Thank you for tuning in to today's Emerald Gem, which stands for Get Educated in Minutes. I'm Jeff Wolken, national Director of Delaware Trust Planning for Wilmington Trust, Emerald Family Office and Advisory, and your host for today's podcast. In today's gem, I'm gonna answer the question, how can I use a personal trust to help prepare my family for inherited wealth?
With historically high exemptions from federal estate and gift taxes at almost $14 million per person. Many families are turning to funding personal trust to protect and preserve their family endowment for future generations. Unfortunately, beneficiaries receiving significant inheritances may have limited financial literacy or financial management skills.
They may be missing a common purpose or vision among family members regarding the use of these resources or lack effective communication or trust among family members. Fortunately, Delaware's recently enacted law permits trustees provide so-called beneficiary well-being programs to trust beneficiaries to help prepare beneficiaries for the wealth.
The use of this one of a kind law is available to families around the country so long as the trust is administered in Delaware. Starting in August of 2024, Delaware's new law allows you to create a trust and require that your trustee shall provide beneficiary well-being programs. Moreover, the statutory default powers of a trustee were amended to grant trustees of all Delaware trusts, whether created before or after enactment of the new law with the additional power to hire providers of beneficiary well-being services.
Whether the trust explicitly requires a trustee to provide beneficiary well-being programs, or the trustee provides these services under its default fiduciary powers, the trustee may pay for such services from the trust estate. When planning your trust, it is common to focus on mitigating taxes and maximizing distributions to family members.
Consequently, you may overlook opportunities to develop shared family values, preserve family history and heritage, participate in family philanthropy, enhance communication skills, and share your intentions behind this significant transfer of wealth. Trust provisions often focus on controlling a beneficiary's access to the trust funds and limiting information passing to a beneficiary with the goal of protecting the beneficiary from themselves.
However, these restricted provisions may negatively impact your beneficiary's well-being by limiting their ability to gain important financial skills, become involved with your family's wealth in a meaningful way, or learn family values and social responsibility that comes with inheriting family wealth.
Moreover, the powers and duties of a trustee have historically focused on providing the greatest financial impact for a family. Lowest taxes, highest returns, and the largest value of distributions for beneficiaries. Traditional trustee powers included powers to buy and sell assets. Hire and fire advisors determine distributions and powers related to tax compliance and efficiency.
These traditional powers don't address the impact of wealth upon the family, the traditional duties only address of beneficiary's financial well-being, not their personal non-financial well-being. The new Delaware law enhances a trustee's power to help prepare the family for the wealth. The goal of beneficiary well-being programs is to provide for your beneficiary's holistic well-being.
Beneficiary well-being programs are defined to include seminars, courses, programs, workshops, family meetings, family retreats, family reunions, or other programs, with the purpose of preparing each generation for inheriting wealth by providing estate and asset planning skills, assistance with navigating intergenerational asset transfers.
Developing wealth management and money skills, financial literacy, business fundamentals, knowledge of a family, business, and philanthropy. The programs may also educate your beneficiaries about your family's history, your family's values, family governance and communication among family members. These new fiduciary powers are essential for modern trust planning.
Beyond the ultra wealthy who are capturing bonus federal estate and gift tax exemptions in multi-million dollar trusts. A beneficiary well-being trust can serve any affluent family who wants their heirs to receive more than financial benefits from their wealth. Even if a trust does not last indefinitely, the next generation may benefit greatly from receiving financial literacy education, coaching around inheriting wealth.
Information about the beneficiary's family history, family values, family governance, and a connection among family members. Delaware's one of a kind law is available to families across the country and offers programs for trust beneficiaries to educate, develop, and align the family across multiple generations with the collective goal of passing on family values to beneficiaries, and preserving the family legacy.
Thanks again for joining us today. Please contact your Wilmington Trust advisor if you have any questions about how you may use a personal trust in Delaware to help prepare your family for inherited wealth. We are happy to help you. See you next time.
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