July Wealth Strategies

An estate plan is the roadmap that tells others how you want your personal and financial affairs to be handled. It is the process by which you or your family can arrange the transfer of assets in anticipation of death or incapacity. One of the strategies available to individuals establishing an estate plan is a trust.

A trust is defined as a fiduciary arrangement that allows a third party, known as the trustee, to hold assets on behalf of a beneficiary or beneficiaries. Some of the most common uses for a trust are to:

• Maintain control of your business and/or personal financial affairs
• Control abuse or loss of assets by heirs
• Provide for a disabled heir
• Save on taxes
• Avoid probate

Probate is a court-supervised proceeding that authenticates your will and approves your named executor so he or she can distribute your property and belongings. Probate can be a lengthy and potentially expensive process that your heirs will be eager to avoid. Keeping your assets out of probate court is a key goal of many trust strategies.

Trusts generally fall into one of two categories: revocable and irrevocable trusts. With a revocable trust, the creator may serve as the trustee, and there is a successor trustee named to serve following the death or disability of the trust’s creator. The trust owns the assets, and it is fully amendable and revocable by the creator. Fairly easy to administer, a revocable trust can help keep your assets out of probate court, although the tax advantages are limited. The trust can also help with privacy concerns, if you’re worried about business competitors or potential creditors becoming aware of your assets.

An irrevocable trust, by contrast, is one where the creator cannot change or end the trust after its formation. Since you surrender control of the assets in an irrevocable trust, their value moves out of your estate. An irrevocable trust can be especially valuable if you are seeking to:

• Make gifts either to family or to a charitable interest
• Create provisions around a gift or inheritance
• Maximize tax benefits, including estate taxes
• Shield assets from creditors

Coordinating Your Will and Trust Strategies

When executed properly, a trust strategy works in concert with your will to provide an efficient wealth transfer to your heirs. Your last will and testament can transfer your assets to the trust at the time of your death, while the trust contains the controlling terms of your estate plan.

You simply transfer the desired assets to a revocable trust and administer the trust through the remainder of your lifetime. Upon your death, your successor trustee will determine which of your assets are not owned by the trust and whether the probate process is required.

To learn more about the benefits a trust can bring to you, start by watching the July webinar for more details and contact your Baird Financial Advisor.  Baird Trust can work with your Financial Advisor to help build an estate plan that’s right for you and your legacy.

For information on our upcoming webinars, as well as more past recordings, visit our Wealth Strategies page.

The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.