Trusts Can Help You Achieve Your Estate Planning Goals

I’ve been interviewing electrical contractors and others in the construction business lately about their perceptions of investing as it relates to working with people like myself versus doing it on their on. I always tell them how important it is to focus on their contracting business. I tell them this because there is a lot more to creating and preserving wealth than watching MSNBC while competing for bids with competitors. The wealth you’ve built really doesn’t mean much if Uncle Sam sticks his hand in at your passing. Estate planning is extremely important for the highly successful electrical contractor who owns several pieces of real estate, retirement plans and other businesses.

When you develop your estate plans, you might be surprised at all of the objectives you want to accomplish. Of course, you want to leave your assets to your family members in a way that’s fair and beneficial to everyone. But while you’re at it, can’t you avoid the drawbacks of probate? And how can you make sure your wishes are carried out if you’re incapacitated? And can’t you support your favorite charity without shortchanging your heirs? Have your children learned your business, and are they currently in a position to take over your contracting business should you pass away?

Clearly, these are major goals. And if you’re going to achieve them, you’ll need to employ the right estate planning strategies—and you may find that trusts can help.

Several different trusts are available. Let’s look at a few of them, starting with a living trust.

Living Trust

When you create a living trust, you get some key benefits, including the following:

You may avoid probate. If you just have a will, your assets may have to pass through the probate process— which can be time-consuming, expensive and a matter of public record. But with a properly established living trust, your assets can pass directly to your beneficiaries, with no court interference, no legal fees, no lengthy delays and no public disclosure.

You can safeguard your children’s interests. When your will is probated, the court sets up a guardianship for your minor children. You can name the guardian in your will, but the court could still appoint someone else. Just as importantly, the court, not the guardian, may control the inheritance until your children reach legal age. At that time, they may receive the entire inheritance. But with a living trust, you determine when your children or grandchildren will receive their inheritances. You can even have the money distributed in installments, over a period of years.

You can retain control of assets, even in cases of incapacity. When you establish a living trust, you designate a successor trustee who can immediately step in for you if you become incapacitated. And your trustee must follow your wishes as far as providing funds for you, and later, for your beneficiaries.

Charitable Remainder Trust

A living trust can help you deal with many issues that relate to your family. But if you want to include a charitable organization in your estate plans as well as make your appreciated low-yield assets more productive, you may want to consider a charitable remainder trust.

If you place appreciated stocks in a charitable remainder trust, you’ll receive an immediate income-tax deduction and later an estate tax deduction. The trust can sell your appreciated stocks with no immediate capital-gain taxation, purchase an income-producing vehicle and pay you an income stream for life. Upon your death, the trust will pay out the remaining funds to the charity or charities you’ve chosen.

Irrevocable Life Insurance Trust

But if you set up a charitable remainder trust and fund it with appreciated stocks or other assets, won’t you be depriving your family of those resources? Yes. But you could use some of the income you receive from your trust to pay the premiums on a life insurance policy on yourself, with your heirs as beneficiaries. To keep this policy out of your estate and avoid estate taxes, you may want to put it in another type of trust—an irrevocable life insurance trust.

Trusts are not suitable for everyone. And they can be quite complex instruments, so, before taking any action, consult with your tax and legal advisers. But if your trusts are correctly set up, they can go a long way toward helping turn your estate plans into reality. Please see a qualified professional to ensure that you aren’t paying unnecessary taxes for the estate you’ve worked so hard to build.

Jesse Abercrombie
Jesse is a financial adviser with 14 years of experience in the industry. He is experienced in working specifically with construction business owners and executives, along with centers of influence, to build customized investment strategies. He also focuses on helping individuals with their financial strategies during life events such as divorce. Jesse works in tandem with CPAs and estate and family law professionals to help service client financial goals and objectives.