“Maybe it’d stop you trying to be so desperate about making more money than you can ever use. You can’t take it with you, Mr. Kirby. So what good is it?”
This is one of my favorite lines from the 1938 movie, “You Can’t Take It With You.” It’s often used in reference to living in the moment. In my line of work as an executive financial advisor, I know there are plenty of answers to that question (donating to charity, for example). However, I find it also leads me to ask a slightly different question: What good are your money and possessions if you can’t determine where they go and who they go to? This is where living trusts come into play.
A living trust can be a valuable estate planning tool for executives. It’s one I’ve helped many of my clients implement because of the benefits it offers. Here’s a closer look at the living trust benefits to consider as you plan what will happen with your hard-earned assets when you’re no longer able to manage them.
What Is a Living Trust?
A trust is used to help determine what and how funds and property are left to your heirs. You act as the trustee of your trust until you are no longer able to, usually due to illness or death. At that point, a successor trustee you have appointed takes control of the assets in your trust and distributes them according to your predefined wishes.
There are two types of living trusts: revocable and irrevocable. For purposes of this article, I’d like to focus on revocable trusts. While irrevocable trusts offer many estate planning benefits, they cannot be changed once they are established. This makes them less popular among the executives I work with.
Revocable trusts, on the other hand, have the ability to be changed throughout your life. This flexibility makes revocable trusts a good option for many of my clients.
In addition to this flexibility, there are some other benefits of revocable living trusts (referred to as simply “living trusts” for the remainder of this article) that pertain specifically to high-level executives.
Three Living Trust Benefits Executives Should Know
While living trusts offer many benefits, there are three key ones to consider when planning your estate:
- Management and Control of Your Legacy
One benefit of a living trust is the control it affords you over your legacy. By appointing a successor trustee and leaving directions through the trust documents, you have control over what happens to your business, real estate, and other assets, even if you can’t personally manage them yourself.
Compare this to if you did not take the time to set up a living trust. In this case, your estate would go through probate, and a court-appointed trustee would manage your assets when you are no longer able to do so. This person would follow your last will and testament. However, some of that is also up to their discretion, meaning you lose some control over how your assets are handled. This is a devastating thought to many of my clients who have worked extremely hard for years to earn what they have. If you want to ensure your strategies and ideas about your business and real estate are implemented, a living trust is an effective management tool to employ.
- Ability to Avoid Probate
Through my career as a financial advisor, I’ve seen the pain families go through having just lost a loved one and then needing to sit through long probate court proceedings as their loved one’s assets are distributed. By determining how your assets will be handled in your trust documents, you allow your family to completely bypass the probate process.
You also avoid ancillary probate when you establish a living trust. This is something that affects a lot of my executive clients. Ancillary probate is a required secondary court preceding if you own real estate in another state in addition to your main residence. You could be subject to ancillary probate when you pass on these assets to your heirs. Ancillary probate can have excessive costs associated with it, including the need to hire an additional lawyer in the state in which you own real estate. The ability to avoid ancillary probate, and the time and money that comes along with it, is certainly a benefit of using a living trust.
- Privacy
Probate is something that typically happens publicly, so if privacy is a concern for you, a living trust is a good way to settle your affairs.
A living trust can help you dictate certain factors, such as the age your children need to attain before they can access funds or assets. It also affords privacy for your heirs in regards to who inherited what and what amount each family member inherited.
The last thing most people want is for their family members to be treated differently because their financial situation has been made completely public. A living trust ensures that your family inherits the assets you want them to, when you want them to, without broadcasting it to the world.
Are There Disadvantages to Living Trusts?
While living trusts offer important estate planning benefits, there are drawbacks to consider. One big one is the need to retitle your assets. Because the living trust is an entity in and of itself, the assets you wish to be controlled by the trust will need to be owned by the trust. This means retitling your assets accordingly.
If you ask any estate planning attorney, they will likely tell you that retitling your assets is one of the most time-consuming aspects of setting up a living trust. It can be a long process, depending on the number of assets you own. It is important to work with your financial advisor in conjunction with an estate planning attorney to ensure all of your assets are titled properly. If you don’t title an asset correctly, there’s a good chance that the living trust will not be able to make any changes or management decisions concerning that particular asset.
“You can’t take it with you.” That saying rings true, especially when you consider all that you have accumulated and built in your years as a top-level executive. While you can’t take money or possessions with you, you can ensure that your family and friends will be taken care of when you leave this world. The legacy you leave is directly related to the decisions that you make today, so consider the benefits of a living trust and discuss them with an experienced executive financial advisor. By using the proper strategies, you can take control of your legacy.
K. Wade Carpenter, CFP®, AIF®, ChFC®, CLU®, is an innovative wealth manager serving corporate executives and entrepreneurs from coast to coast. Throughout his more than 25-year career, Wade’s focus on C-level clients has made him a top strategist for integrated asset allocation and equity compensation management. For more information on how Wade and the Carpenter Team can advise you on living trust benefits for executive-level estate planning, reach out today for a complimentary consultation.
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