People who have worked hard to accumulate wealth want to share their prosperity with their children, grandkids, and future generations. A family trust is a terrific place to start when it comes to creating this type of generational wealth.
There’s no shortage of online articles detailing how to build generational wealth, but these articles cover how to obtain wealth (enough to pass to younger generations). However, obtaining wealth is only half of the equation. The other key to sustainable generational wealth is ensuring your wealth remains protected and transfers optimally.
Trusts are important for properly managing wealth across numerous generations and handing it down to beneficiaries on your terms. You can create a trust to describe how your assets will be managed, who will have access to them, and what deadlines and criteria must be satisfied. For example, depending on your needs, you can set up a trust for the care of a spouse who may outlive you or to manage assets for minor children until they reach the age of majority (or later). Trusts can also protect assets from the vagaries of creditors or the divorce of a beneficiary, and they can provide flexibility for unforeseen circumstances.
Both revocable trusts and irrevocable trusts can be structured so that at the death of the grantor (person who creates the trust) their nest egg continues to grow protected, but there are important differences in these types of trusts that are helpful to consider.
Revocable trusts are a living trust that allows the grantor to amend or cancel terms in the original trust documents during their lifetime. Income earned by trust assets is allocated to the grantor throughout their lifetime and then transferred to the beneficiaries following the grantor’s death. Because assets are included in the grantor’s estate and are subject to estate taxes, revocable trusts do not give any immediate tax benefits to the grantor.
There are many types of irrevocable trusts which are tailored to achieve certain outcomes. But as the name suggests, you can’t revoke the trust, and there will be some degree of limitation on changes to who the trustees are and the beneficiaries both during the grantor’s life and at death. Again, because of its irrevocable nature, this means that even if you find yourself in a circumstance where you need the assets in the trust, you may not be able to access them.
Because you relinquish a large amount of control over the assets in an irrevocable trust, they can be a way to have the assets not considered part of your estate for tax purposes at your death. Furthermore, these assets have heightened protection from creditors and lawsuit claimants during the grantor’s lifetime.
Communication is part of estate planning
Finding a trusted estate planning lawyer to foster constructive communication is one of the best strategies to sustain generational wealth. For example, this advisor will understand each generation’s wealth and circumstances and give you guidance on how to share your decisions with family, reducing surprises and drama at death, which most clients tend to want to avoid.
Let Us Help You Take Control of Your Legacy
Attend one of Promise Law’s free estate planning workshops to learn more. These workshops provide a great foundation of information that everyone needs to make sound planning decisions. Moreover, if you attend a workshop, you also get a complimentary one-on-one consultation.