The Importance of Trusts in Your Estate Plan


A trust is a legal arrangement that transfers property to a trustee, who manages the assets according to the terms of the agreement. Trustees are fiduciaries, meaning they are legally bound to act in the beneficiaries’ best interests. The purpose of a trust is to ensure that assets are distributed to the right people at the correct time, and in accordance with the grantor’s wishes. There are many reasons to include a trust in your estate plan, including: reducing the administrative burden on family members; keeping personal property safe from creditors and other claimants; protecting minors from mismanaging or spending an inheritance; shielding assets from divorce and lawsuits; and avoiding or minimizing wealth transfer taxes.

One of the most important aspects of a trust is the trustee. Choosing someone who is responsible and reliable is essential. It is also a good idea to involve your trustee early in the process, so he or she will be prepared to take over when the time comes.

Another key aspect of a trust is the ability to hold back distributions from the Trust until the beneficiary reaches a certain age or achieves a specific milestone, such as graduating from college or getting married. Lastly, a trust can be used to provide for an individual with special needs, and to protect beneficiaries from unwise or extravagant spending habits.

The costs associated with establishing and maintaining a trust can vary depending on the type of assets included, where they are located and how they are titled. For example, retitling real estate may require the assistance of an attorney. It is also a good idea to keep records of all transactions, including copies of the trust document and investment statements.

Creating a trust can be an effective tool in any estate plan, regardless of the size or value of the estate. However, the benefits of a trust can be diminished if not administered properly. To ensure your trust is functioning as intended, it is a good idea to periodically meet with your trustee and review the trust documents. Also, consider consulting with both your tax advisor and attorney about the specifics of your trust.

Jim Sandager, MBA, CFP is a Senior Vice President-Financial Advisor at Wealth Enhancement Group and co-host of “Your Money” on News Radio 1040 WHO. Securities offered through LPL Financial, member FINRA/SIPC. Advisory services provided through Wealth Enhancement Group, LLC, a Registered Investment Advisor.

The information contained herein is based on sources that we believe to be reliable, but we do not represent that it is accurate or complete. Nothing contained herein should be construed as financial advice or as an offer to sell or solicitation of an offer to buy any financial instruments discussed herein. Such offers can only be made by way of written documentation executed by a duly authorized officer of the firm. Investing involves risk including the potential loss of principal. Investors should consult with their own investment, tax, legal and accounting advisors before making any investment decisions.