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A trust can be a highly useful estate planning vehicle, designed to help you to preserve the wealth you’ve worked diligently to build while setting a plan in place to carry out certain elements of your legacy, from giving to your favorite charity to funding a grandchild’s education.

A trust is a legal agreement between two parties: the person who creates the trust, also known as the grantor, and the trustee. It is really a set of instructions you give to your trustee to carry out on your behalf for your beneficiaries. Almost any type of asset can be placed in a trust, including cash, stocks, bonds, insurance policies, real estate and collectibles.

While a will allows you to distribute your estate as you choose at your death, trusts can work to your benefit during your lifetime. Furthermore, using a trust instead of a will enables you to bypass the often-lengthy probate process and maintain strict privacy.

There are several different kinds of trusts designed to help you accomplish specific estate planning goals:

  • Ensuring a lasting legacy for your family
  • Establishing a fund for your own support
  • Protecting your assets from considerable tax liability
  • Caring for a loved one with special needs
  • Supporting your philanthropic goals  

Living Trusts

A living trust, as the name implies, is a trust that is created during one’s lifetime. It offers the assurance of knowing that loved ones are provided for as well as protection to beneficiaries whose judgment or financial experience may be limited.

In the event of your incapacity or death, a successor trustee you choose – either an individual or a corporate trustee – can immediately step in to manage the trust and its assets without court involvement. Unlike a will, a living trust generally avoids probate and does not become a matter of public record. It offers protection to beneficiaries who may require guidance.

A living trust can be revocable or irrevocable:

  • A revocable living trust allows the grantor to retain control over it by retaining the power to cancel or change the trust’s terms or to terminate it at any time.
  • An irrevocable living trust, mostly used to provide tax savings and protect assets, cannot be changed or canceled.

Marital Trusts

A marital trust is an arrangement that allows a married individual to put some or all property into a trust with the spouse as the beneficiary. If your estate is over the federal exemption for estate taxes, a marital trust can help to make the most of tax exemptions for both you and your spouse. It can also be helpful in planning the distribution and protection of assets within blended families, should you wish to leave your assets to your biological and adopted children.

Generation Skipping Trusts

A generation skipping trust is often the best option when your children are financially secure, and you want to provide for your grandchildren or great grandchildren instead of bequeathing all of your assets to your surviving spouse or children.

Special Needs Trusts

A special needs trust is designed to provide financial security, benefits coordination and life enrichment for a beneficiary with special needs or a disability. At its core, a special needs trust is designed to preserve a beneficiary’s eligibility for certain governmental or private benefits programs while allowing the beneficiary to benefit from trust assets in such a way as to supplement, but not supplant, those benefits. Without a special needs trust, the extras that can enrich you or a loved one’s life and make it more enjoyable may have to be limited or eliminated.

Life Insurance Trusts

A life insurance trust allows the trustee to purchase a life insurance policy on the life of the person who creates the trust, or the grantor, with the trust itself named as the beneficiary. Upon the grantor’s death, the trust may use the proceeds from the life insurance policy to make loans to or purchase assets from the estate, thereby providing funds to pay taxes or other expenses owed. The remaining proceeds are then distributed to the beneficiaries, according to your instructions specified in the trust.

Charitable trusts

Charitable trusts can help you support the organizations or causes you care about, create an income stream and pass on wealth to your loved ones in a tax-efficient way.

A charitable trust can be a remainder trust or a lead trust:

  • A charitable remainder trust allows you to support a favorite charity and still receive an income stream from the trust for a period of years or for life.
  • A charitable lead trust pays an annuity to a charity for a set number of years, then pays the remaining assets to a named beneficiary upon your death.

Important Considerations

Trusts can provide a strong foundation for your estate plan. However, due to the variety and complexity of trusts, professional advice is essential to determine which may best suit your goals.

Please be aware that establishing certain trusts, such as charitable remainder trusts, may involve substantial fees, charges, and other costs. Past performance or tax benefits are not guaranteed, and trust outcomes can vary based on individual circumstances and applicable laws.  

Glen D. Smith, CFP®, CRPC®
Chief Executive Officer | Chief Investment Officer | Founder

GDS Wealth Management (“GDS”) is a registered investment adviser and is not affiliated with or endorsed by Raymond James. Registration with the SEC or any state securities authority does not imply a certain level of skill or training. This material is adapted with permission from Raymond James Trusts: vehicles to carry out your legacy” Raymond James serves as the custodian for GDS client accounts and has authorized the use of select educational content. This information is intended for informational and educational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy any securities. They are provided to illustrate general financial planning concepts and should not be construed as guarantees of future results. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. The content should not be considered personalized investment, legal, or tax advice.

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