What Is a Family Wealth Trust?

Trusts are a vital wealth planning tool, not only for asset protection, but also for safeguarding the family’s wealth, regulating access to property and assets by younger family members, and providing long-term oversight and investment management for families. The trustee is responsible, either directly or indirectly, for investing those assets and making sound decisions in making distributions to beneficiaries.
Regardless of the size of your estate, it is important to consider protecting your assets and creating a plan to ensure that your family wealth will be passed on as you wish.  The goal of asset protection is to shelter the wealth you have created from unnecessary risks. A family wealth trust can be the most effective and flexible option for protecting family wealth.  When your estate planning attorney properly customizes a trust for your family, the benefits will far exceed simply leaving assets to family members in your will.  Remember, a Family Wealth Trust is not just for the wealthy.
What Is a Trust?
A trust is just an agreement between a trustor, trustee and beneficiary regarding how and when assets will be transferred.  The “trustor” is the person who owns the assets in and creates the trust.  The “trustee” is the person to whom the legal title of the assets passes.  The “beneficiary” is the person who eventually receives the assets after specific conditions have been met.  Trustees can be friends, relatives or professionals, such as attorneys or accountants.  In some cases, an entity such as a bank or a trust company can serve as trustee.
How do Family Wealth Trusts actually provide protection?
Usually, a family wealth trust becomes irrevocable when the trustor dies.  This simply means its terms cannot be changed once it has been created.  Furthermore, the assets are no longer part of the trustor’s estate once the trust becomes irrevocable.  So, when the trustor passes away, these assets are not considered part of the personal estate and will not be subject to the beneficiary’s creditors.  This is only one advantage of this type of trust.
A Generation-Skipping Trust
Another option to consider is the Generation-Skipping Trust, which will allow you to retain your tax exemption on gifts to your grandchildren and avoid the tax on any amounts exceeding that exemption.  In 2014, the Generation-Skipping tax exemption is $5.34 million, which is the same as the federal estate tax exclusion.  This is also a beneficial estate planning tool, if you want to leave assets to your grandchildren.  For instance, you can put $100,000 in a generation-skipping trust and allow it to accumulate earnings for any number of years.  Still, your lifetime exemption would only be reduced by the original $100,000.  If you have any questions about these or any other asset protection tools, please contact our office.

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Gerald M. Dorn, Estate Planning Attorney

Gerald Dorn is a shareholder and has been a partner at Anderson, Dorn & Rader, Ltd. Since 1998. Mr. Dorn has extensive experience serving wealthy families and business owners in the development of estate, tax and asset protection planning strategies. He made the decision to focus his practice in the area of estate planning after witnessing the personal grief and financial loss suffered by several of his clients as a result of poor planning. These experiences motivated him to dedicate his professional life to assisting his clients to preserve their life’s work for their heirs and to create a lasting legacy for those they love. Mr. Dorn is able to accomplish his mission through the use of a vast number of estate planning tools, both basic and advanced, for all of his clients at Anderson, Dorn & Rader, Ltd.

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