Trusts are legal entities that can be formed to accomplish various goals. Sometimes these goals are related to objectives you want to reach during your lifetime, and at other times, after your death. Trusts are not the answer to every situation, but under the right circumstances, they can be an integral part of achieving your objectives.
Trusts are formed and managed by a document that must be written by an attorney. We are not attorneys and do not write trust documents. We will, however, work with your attorney to ensure that the content of your document is in line with all of your financial goals. At Cora Capital Advisors, we realize that full coordination between advisors is a critical step in avoiding incorrect asset titling and beneficiary designations. Our team approach and collaboration with various professionals helps to guarantee that all of your advisors are working in concert toward the same end.
Trusts can be structured in a variety of forms. Each type of trust has its own set of income tax, estate tax and other implications that need to be considered. If a trust is not set up or managed properly, it may fail to serve the intended purpose.
In general, all trusts will have certain “actors” involved. The Grantor is the person who sets up and typically funds the trust with cash or other assets. The Trustee is the person who is responsible for managing the trust in accordance with the guidelines written in the document. The Beneficiary is the person who is entitled to the proceeds of the trust in some form or fashion. There can be one or more of any of the above, and sometimes one person may serve more than one role.
Here is a brief summary of some of the commonly used trust arrangements:
Irrevocable Life Insurance Trust (ILIT)
An ILIT is set up during the Grantor’s lifetime. Generally, the intent of this trust is two-fold. Firstly, it allows for the value of any life insurance policies owned by the trust to be excluded from the Grantor’s taxable estate. Secondly, it allows for significant flexibility and control over how and when the proceeds of those policies are paid out to beneficiaries.
These trusts, also known as Inter Vivos trusts, are also established during the Grantor’s lifetime. Typically, a living trust is revocable, meaning it can be changed at any time during the Grantor’s lifetime. Primarily, living trusts are adopted to avoid having one’s assets pass through the probate process at the time of their death. Depending on a person’s state of residence and personal wishes, the appropriate use of a living trust can result in significant savings for a person’s heirs.
Charitable Trusts can be set up in many different ways. Depending on an individual’s goals, they can often be used to satisfy significant charitable desires while also achieving a secondary benefit. Typically, the benefit will come in the form of either income tax savings or removal of assets from a taxable estate. This is one area where proactive planning can often help someone achieve a charitable objective that may not otherwise be possible without the accompanying tax benefits.
While this is far from the extensive list of the types of trusts available, we will work with you and your attorneys to determine if any type of trust structure may be beneficial to you.