When it comes to Estate Planning, creating one or more Trusts for your loved ones can be one of the smartest ways to ensure that your wealth is well-managed when it’s time to pass it down. Think of it as planning ahead – things often go a lot more smoothly when you arrange them in advance, don’t they? And when it comes to the accounts, investments, and real estate you’ve worked so hard to maintain throughout your life, you don’t want to wait until the last minute to see that your assets will be distributed and handled wisely. Earning them took work, and managing them takes work, too. Creating a Trust as part of your Estate Plan is doing the work needed to make certain your assets will be overseen just as you’d want them to be.
A Trust can make things easier. Furthermore, if you have something of value that you eventually want to leave to someone else, a Trust may be right for you. But no two trusts are the same. The personal details of a Trust depend not only on the recipients of the Trust and the assets it is set up to manage, but also on the type of Trust that is created. Which type of Trust you choose to prepare can affect how that Trust is administered. Just as planning ahead can help reduce uncertainty, being informed about the types of Trusts and other Estate Planning choices can make things a little simpler for you.
When a Trust is needed
Each Estate Planning scenario is unique, which is why customized Estate Planning documents, including Trusts, are often needed. A Trust is a legal document that allows one person, the Trustor/Grantor, to transfer an asset to another person, the Beneficiary. This transfer and management of the asset is managed by the Trustee. The Trustee can be the Beneficiary, the Trustee can be a neutral third party who does not benefit from the Trust but who manages it in a way that’s in the best interest of the Beneficiary.
Creating a Trust can allow a Beneficiary to receive assets while minimizing tax dues, time spent in probate court, and other expenses that can come up when distributing wealth or settling an estate. There are several different types of Trusts that are used in Estate Planning, and a Directed Trust is one of them.
Setting up a Directed Trust may be called for when you want to:
Manage assets that generate income/profit
Distribute investments to one or more
Transfer, buy, sell, or manage real estate
Split revenue from an asset among several beneficiaries
And in other scenarios when certain assets are involved. Unlike some other Trusts, a Directed Trust will include not an ordinary Trustee but a Directed Trustee.
What is a Directed Trustee?
In a Directed Trust, some of the responsibilities of distributing and managing the property placed into Trust are designated to a specially-appointed advisor, known as the Directed Trustee. This advisor may be a wealth-management firm or one individual well-versed in the financial, legal, and other fiduciary duties inherent to managing the assets in a Trust.
What does a Directed Trustee do?
When a Directed Trustee is assigned to a Trust, they are then allowed to make certain decisions about the assets within the Trust. A Directed Trustee may handle administrative task relating to the Trust agreement, accounting duties, distribution of funds or income, and other ministerial functions. A Directed Trustee does not make investment decisions regarding the trust, and usually does not advise the Beneficiary. Though a Directed Trustee may work for a Trust management service or a financial institution, he or she is not hired to be an investment coach or financial advisor, though they may work alongside wealth-management professionals in managing the assets within or generated by the Trust.
A Directed Trustee has the responsibility to preserve the assets in a Trust, distribute them as specified in the Trust agreement or as is standard, and to see that the paperwork associated with the Trust and its profits is kept up with. A Directed Trustee may be used when a trust contains investments, shares of a business, a shared asset, or when the interests of a minor Beneficiary are involved. In other words, a Directed Trustee may be used in times when you want to bring in a professional in order to assure that what you leave to another person in Trust is maintained properly.
Directed vs. Discretionary Trustee
Is a Directed Trustee the same as a Discretionary Trustee? No. Though the titles may sound similar, you don’t want to get them confused with each other. A Directed Trustee handles some aspects of a Trust but has little-to-no authority over investment and financial-management decisions pertaining to the Trust. A Discretionary Trustee, on the other hand, is put in place to make financial-management and investment decisions about the funds or other property in the Trust, as well as any income it may bring in. A Directed Trustee cannot decide how assets in a Trust are used, but a Discretionary Trustee can.
Do you need a Directed Trustee?
If you’re wondering if you need to make a trust, you’ve probably been busy – busy building your business, investing and growing your net worth, raising your family, and looking after your loved ones. But remember, planning ahead can save you a lot of trouble. Making the right Trust as a part of your Estate Plan is a way to keep wealth growing and make sure your family is taken care of.
Whatever the asset, there is a Trust that fits it best. Passing down money in a bank account can be different than bequeathing stock, and leaving part-ownership of a business or property to an heir can be another Trust-management story altogether. That’s why choosing the right Trust for the job and making sure all of your Estate-planning and inheritance decisions are documented is so important.
Here at Trust & Will, we can help you get the Trust documents and other state-specific Estate Planning documents you need. Making a Trust, a Will, and keeping your Estate protected is easier than ever with our affordable online Estate Planning options. Our customizable online documents let you create the Estate Plan that’s best for you and includes state-specific features that will make sure your Trust and your Will is valid in your state. Get started on the Estate Plan you need today!