Why Should I Have a Family Wealth Trust?

Generally speaking, trusts are valuable estate planning tools.  A Family Wealth Trust can be very valuable because it can be used not only for asset protection, but also for preserving a family’s legacy.  With a Family Wealth Trust, you can regulate a younger heir’s access to assets and provide long-term supervision and management of investments. The trustee of a Family Wealth Trust is responsible for investing assets and making sound decisions when distributing your estate to your beneficiaries.

The primary goal of asset protection is to shelter your accumulated wealth from unnecessary risks. A Family Wealth Trust can be the most effective and flexible method for doing that.  Regardless of the value of your estate, asset protection should always be a part of your estate plan, in order to ensure your family wealth will be passed on in the way you intend.

What Is a Trust?

A trust is merely an agreement regarding to whom the property will be transferred.  The agreement is between three parties: the grantor, the trustee and the beneficiary.  The “grantor” is the person who owns the assets in the trust.  The “trustee” is the person to whom the legal title of the assets will actually pass.  The “beneficiary” is the person who will eventually receive the assets after certain specified conditions have been met.  Usually, a trustee is a trusted friend or relative of the grantor.  A trustee can also be a professional, such as an accountant or an attorney, or even an organization.

How do Family Wealth Trusts provide asset protection?

Family Wealth Trusts are normally irrevocable.  This means that the terms of the trust cannot be modified once the trust has been established.  When the trust is created, the assets that will be placed in the trust are permanently removed from the grantor’s estate.  Therefore, when the grantor passes away, the assets in the Family Wealth Trust will not be considered part of the grantor’s estate and will not be subject to estate taxes.  This is a great benefit when it comes to protecting family wealth.

What is a Generation-Skipping Trust?

Another option to consider in family wealth planning is the Generation-Skipping Trust.  If you want to transfer your property to a grandchild, instead of your son or daughter, that property transfer would be subject to the “generation skipping tax.”  This particular tax is assessed on property as it is passed on to a generation that is two or more levels below the generation actually transferring the property.

A Generation-Skipping Trust, also known as a “dynasty trust,” is designed specifically to avoid, or at the very least minimize, estate taxes on transfers to subsequent generations.  This can be accomplished by holding the assets in the trust and distributing the funds in a pre-defined way to each passing generation.  As a result, the entire amount of the trust can effectively be protected from estate taxes with each subsequent generation.

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