What Is a Family Wealth Trust?

Trusts can be very valuable wealth planning instruments, to be used for asset protection as well as safeguarding family wealth.  Trusts can also be used to regulate a younger family member access to property if necessary, while providing long-term oversight and management of investments.  The trustee of a family wealth trust will be the one responsible for investing the assets and is expected to make sound financial decisions when distributing assets to beneficiaries.

No matter the size of your estate, it is wise to consider asset protection.  Creating an estate plan that ensures your family wealth will be passed on as you desire, while protecting your assets from unnecessary risks, is a worthy goal.  A family wealth trust can be the most effective and flexible way to do just that.  Finding an estate planning attorney who can customize the trust for your family is a much better option than simply leaving your estate to your family in a will.  Family wealth trusts are not just for wealthy families.  Family wealth trusts protect everyone.

A trust is basically an agreement to manage assets

Trusts are not complicated legal documents.  A trust is basically an agreement between the grantor and the trustee.  The grantor is the person who owns the assets and intends to transfer them to someone known as the beneficiary.  The trustee is the person to whom legal title to the assets initially passes.  The beneficiary will only receive the assets after certain conditions have been met, or events have transpired.  A trustee can be a friend, a family member or a professional, such as an accountant or attorney.  Organizations can also serve in the capacity of trustee.

Family Wealth Trusts provide asset protection

Generally, when a family wealth trust is created, it is specified as an irrevocable legal instrument.  The term “irrevocable” simply means the terms of the document cannot be altered once it has been created.  Once an irrevocable trust is created, and the grantor’s assets are transferred to that trust, they are permanently removed from the grantor’s estate.  This can mean they are not considered a part of the grantor’s estate upon his or her death, and may not be subject to estate taxes, which is an advantage in estate planning.

Generation Skipping Trusts

Another type of trust you can consider is a “generation skipping trust.”  This kind of trust allows you to retain your generation skipping tax exemption on gifts to your grandchildren.  You can also avoid taxation on any gift amounts that exceed that exemption.

This year, the generation skipping tax exemption is $5.34 million – the same as the federal estate tax exclusion.  For those who want to leave money specifically to their grandchildren, a generation skipping trust is a great estate planning tool.  You can transfer $100,000, for example, to a generation skipping trust and let it accumulate earnings for several years.  The amount can be significantly increased by the time the assets are distributed to your beneficiaries.  Meanwhile, your lifetime exemption is only reduced by the $100,000 you originally transferred to the trust.  The benefits are obvious.

If you have questions regarding a family wealth trust, or any other estate planning needs, please contact Sexton, Bailey Attorneys, PA online or by calling us at (479) 443-0062.