INDUSTRY INSIGHT
WEALTH MANAGEMENT
SPONSORED CONTENT
TRUSTS AND
TRUSTEES
Provided by RBC Wealth Management and Eric A . Gregory , CFP ®
After actor Philip Seymour Hoffman died , court documents revealed that he didn ’ t want his children to become “ trust fund kids .” Rather than establishing a trust , he chose to leave his fortune to his girlfriend who is the children ’ s mother .
The decision to create a trust is a personal one . But , beyond the potential of creating unmotivated children , a trust can be a smart fiscal choice and a way to ensure that the legacy you built during your life continues after your death .
n WHAT IS A TRUST ?
A trust is a legal entity authorized by law . There are two basic categories : a living or inter vivos trust is created during your lifetime , and a testamentary trust is established after death .
The terms of a trust are many and limited only by your imagination . But , some of the most common reasons to establish a trust are to :
• Dictate specific terms and conditions for the distribution of your wealth
• Plan ahead and ease the burden for loved ones after your death
• Avoid probate
• Reduce estate taxes that could take a significant bite from your financial legacy
• Allow for easier management of cash needs and assets if you become disabled
• Establish continuity of asset management at death
• Support a philanthropic cause
n THE BASICS A grantor is the person who establishes and transfers property into the trust . He / she can also be called a settler or donor . A beneficiary is the person or entity that receives the benefits of the trust . A trustee has an important role . This is the person who manages and administers the trust . He / she holds a legal , but not a beneficial , title to the trust assets and has power over the disposition of the trust property in accordance with the trust agreement .
n ROLE OF A TRUSTEE
Having a professional trustee is not a legal requirement . But it can be an enormous advantage to those who do not have the time or expertise to successfully manage their own trust . Professional trustees can be used in many different ways and serve many different purposes . But the main responsibility is to give clients peace of mind and excellent service in the management of their trusts .
A trustee acts as a fiduciary for the trust . The role of trustee comes with a multitude of responsibilities . Therefore , trustees should be highly organized , oriented toward serving others , and have a solid understanding of financial basics .
A trustee ’ s main duty is to exercise reasonable care , skill and judgment for the trust . This means he / she must treat beneficiaries the same , without favoring one over the other unless the trust specifies it . This also means
investing the trust assets in a conservative manner that will result in reasonable growth with minimum risk unless the trust allows for a less conservative approach .
Trustees cannot use trust assets for their own benefit unless the trust authorizes it . Trust assets must be kept separate from a trustee ’ s personal assets , with separate checking and investment accounts . Accurate records must be kept , tax returns filed and reports sent to beneficiaries as the trust requires .
Failure to act as a fiduciary exposes the trustee to a lawsuit from the beneficiaries if they feel the trust was mishandled or they were wronged in some way .
n WORK WITH A PROFESSIONAL
A financial professional can help determine what kind of trust is right for your situation . You may also want to consider a professional trustee if you don ’ t want to burden a family member with the responsibilities and issues that arise from this role .
You worked hard to build your wealth and legacy . A trust and responsible trustee will help to protect both after your death .
This Industry Insight was written by Eric A . Gregory , CFP ®.
This article is provided by Eric A . Gregory , CFP ®, a Financial Advisor at RBC Wealth Management in the Southpointe office . The information included in this article is not intended to be used as the primary basis for making investment decisions . RBC Wealth Management does not endorse this organization or publication . Consult your investment professional for additional information and guidance .
Trust services are provided by third parties . Neither RBC Wealth Management nor its Financial Advisors are able to serve as trustee . RBC Wealth Management does not provide tax or legal advice . All decisions regarding the tax or legal implications of your investments should be made in connection with your independent tax or legal advisor .
RBC Wealth Management , a division of RBC Capital Markets , LLC , Member NYSE / FINRA / SIPC ( 07 / 14 )
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