During two of my recent financial seminars, I received a lot of questions about wills, trusts and estate planning. While I’m not an attorney and cannot provide legal advice, I do have specialized training as a Certified Financial Trust Adviser. I also serve as a personal trustee for several of my clients who have established trusts. There are many myths about trusts that can stand in the way of sound planning. I am happy to de-bunk some of them for you in today’s column:

 

Myth #1 – Trusts are just for the wealthy. Actually, even folks with modest means can use a trust to effectively transfer assets to their beneficiaries. Here’s an example: A widower has three adult children (living in different parts of the country). He has a house worth $200,000 and investments totaling $100,000. At his death, the widower wants his house sold and the net proceeds, plus his investments, to be split three ways. However, the widower has some concerns: 1. the three children don’t always get along; 2. there’d be a lot of travel for them to sell the house and settle his affairs; and 3. one of his kids is not responsible enough to handle an inheritance. The solution? The widower could establish a “revocable trust” and designate one of his children (or a different person, to avoid potential sibling in-fighting) to be his trustee. At the widower’s death, the trustee would hire a realtor to sell the house; he would then collect the proceeds, and liquidate the investments. After paying any taxes, bills, and creditors, the trustee would provide an accounting summary to the beneficiaries, along with their share of the cash. With the proper language included in the trust for the financially-challenged child, the widower could instruct his trustee to invest and manage that child’s funds, and disburse them over time (monthly, quarterly, annually, etc.) instead of as a lump sum. The trustee could also have the power to make emergency disbursements.

 

Myth #2 – Trusts are very expensive. Unless you are trying to create something complicated, you shouldn’t have to spend $5,000 - $10,000 for a trust. I’ve seen quality trust work done by knowledgeable, experienced local attorneys for far less. Shop around and ask for a flat rate. Once you have a trust, there shouldn’t be much expense until your trustee’s duties begin. The fees charged by the trustee will depend on: 1. how much money is in the trust, 2. the complexity of the trustee’s duties, and 3. your choice of trustee (e.g., a bank, an attorney, a CPA, an investment adviser, a friend, or family member).

 

Bottom Line: Trusts can be very powerful tools. They aren’t just for the wealthy and they don’t have to be expensive to set up or manage. Get guidance from an attorney to see if a trust could be helpful for your specific situation. You’ll be doing yourself and your beneficiaries a big favor!

 

 

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David D. Holland, a CERTIFIED FINANCIAL PLANNER™ practitioner, hosts a weekday radio show at 9AM on AM1380 Ormond Beach, AM1230 New Smyrna Beach and AM1490 Deland. He has also authored two books in his Confessions of a Financial Planner series. Holland offers investment advice through Holland Advisory Services, Inc., a registered investment adviser in Ormond Beach. He can be contacted at (386) 671-7526. Email your financial questions to info@DavidHolland.com.