Trusts can be used to help preserve and distribute wealth to meet a wide variety of personal and financial goals. Some people use them to protect assets from future claims while continuing to receive discretionary income and principal distributions from those assets. Others use them to pass wealth to future generations. Still others use them to provide for charitable organizations. While the goals may vary, some of the most common reasons to create trusts are to:

  • Minimize estate taxes
  • Protect assets from potential creditors
  • Preserve assets for children or grandchildren
  • Fund charities
  • Provide for personal care in the event of incapacity
  • Shift income taxes to beneficiaries in lower tax brackets

These goals can sometimes be accomplished outside of a trust, but often not with the same tax efficiency and certainty. Other times, these goals can only be met through the use of a trust.

Here’s why: Trusts are legal entities created specifically to hold assets for the benefit of a beneficiary or beneficiaries—a person, a group of people, or even another entity. Trusts enjoy specific legal protections that may vary from state to state. They can be funded with almost anything: cash, marketable securities, real estate, insurance policies, and even shares of privately held companies.

Different types of trusts can be used to meet the goals of the grantor—the person who establishes the trust. Some trusts require the grantor to give up control of the trust assets immediately. Others allow the grantor to retain control of the assets during his or her lifetime and to collect income from the trust prior to his or her death. It is not uncommon for someone to need more than one type of trust to meet all of his or her needs.

As a financial advisor, you have helped your clients invest their money wisely. With a trust, you can help them protect it and ultimately distribute their assets according to their wishes.

To learn more about trusts and how they can benefit your clients, click here for our review of trust basics. But don’t worry about mastering all of the nuances. Our professionals are available every step of the way to help you meet your clients’ trust needs.