Securing Your Legacy: A Complete Guide to Starting Your Family Trust

At No Story Lost, we are passionate about creating legacies in the form of stories that live on forever. We also recognize that we may wish to leave behind more than just memories for our loved ones.

Ever dream about leaving a safety net for your kids and grandkids? One that can keep them afloat no matter what life throws at them? That's what family trusts can do. The good news is that you don't need to be a financial wizard to understand how they work. In this blog, we're going to discuss family trusts in a simple, jargon-free way. If you're interested in protecting your family's financial future, stick around, and let's unravel this together!

Introduction to Family Trusts

Family trusts have been used for generations to allow families to safely pass along their assets to future generations. They are legal documents that make it easier to distribute wealth while helping to avoid probate, minimize gift taxes, and keep the assets safe for the benefit of your loved ones. Any challenges to a will after death would also be avoided if a family trust is in place.

Family Trust Benefits

Setting up a family trust ensures that your loved ones are taken care of after you're gone. With a family trust, you are able to decide how your assets get split up, and specify in detail how this is done. This makes things much easier and cuts down costs in the long run. It also reduces and gift taxes that your beneficiaries might receive and eliminates any disagreements, as is sometimes the case if only a last will is done.

Family trusts are not a matter of public record. This means that your personal information is not published for everyone to see.

Setting up a family trust can also reduce taxes. Beneficiaries are sometimes burdened with a hefty tax levy on gifts that are left for them after a loved one passes. Using a trust will help reduce the gift tax that your family members will need to pay.

Trust Basics

A trust is a legal agreement between three parties - the grantor, trustee and beneficiary. The grantor is the person who creates the trust, and outlines where the assets should go and how they should be distributed. The trustee looks after the trust, according to the instructions in the trust document. The beneficiary is the person or group who benefits from the trust.

Trusts skip the probate process, keep your assets safe and private, and make it easier to pass along to your family members after you're gone.

Trusts are considered to be a separate entity from the grantor. This protects the trust assets in the event of divorce or bankruptcy. There a many different types of family trusts, such as a revocable family trust (this can be changed), an irrevocable family trust (this is unable to be changed), a testament trust (after death), a special needs trust, a marital trust (for a surviving spouse) and a charity trust. Each trust holds different values and benefits and an estate planning attorney can help you determine which one will best suit your needs.

Choosing a Trustee

The person you choose to look after your trust is so important, and you will need to keep a few things in mind when making your selection.

Your trustee should be someone who is able to make sound investment decisions. They should know the laws related to trusts and be able to follow these while the manage. They need to be honest and trustworthy, and be willing to keep the lines of communication open with the beneficiaries, as well as other trustees. A financial advisor is often someone best-suited for this role.

Choosing Trust Assets

Start by taking inventory of your big-ticket items. These could include houses, small business items, collectibles, and mementos that are sentimental or have a large financial value.

Next, you could include items that your loved ones have expressed interest in or that you would like them to pass on to their children. You can also add items that you might buy or inherit in the future (registered retirement savings come to mind).

A financial advisor can guide you through this process, to ensure that you have thought of everything that is important to you and your loved ones.

Trust Agreements

Trust agreements are legal documents that keep your assets safe and make sure that your memory lives on.

A well-written trust agreement should specify how the trustee should manage and distribute the property in the trust, in order to maximize the financial benefit to the beneficiaries. By making the trust agreement clear, you can have peace of mind, knowing that your wishes will be taken care of after your passing.

An estate planning attorney will be able to guide you through the process of creating a solid family trust agreement that will provide for your family members in the future.

Family Trust Funding

After you set up a family trust, you will need to change the legal ownership of the trust assets, in order to protect your wealth in the event of a divorce or bankruptcy. The property and any businesses in the trust will need to show that the trust is now the new owner (as opposed to the grantor). This means re-registering stocks and bonds, changing name on bank accounts and updating other investments. An estate planning attorney is recommended to help guide you through this process, as there are laws about changing ownership of assets that need to be followed.

Trust Administration

The trustee needs to continually monitor the family trust to ensure that the assets are kept safe and invested wisely. They will need to keep up with any changes in estate planning laws, government benefits and tax policies or any other rules that might affect the assets of the trust. Any changes should be communicated to both the grantor and beneficiary.

Lawyers, accountants or financial advisors are all great resources to help administer your family trust. They are experts in this field and will ensure that the trust is managed in a way that will best financial benefit to the beneficiaries.

Trust Taxes

The rules around trusts, including tax-free amounts and deductions, can be different depending on the state or province. Some places might tax the assets in the trust, or income, including personal finance, every year, whereas others may not. Understanding the pros and cons of different states or provinces can help families decide where to establish their trust.

It's important to stay up to date on estate taxes, location-dependent rules or laws and any changing restrictions in order to pass on as much wealth as possible.

An attorney who understands estate taxes can guide you through this complex component of your family trust and help you establish it in a way that best meets your goals.

Succession Planning and Trustees

One of the ultimate goals of a family trust is to pass along wealth and assets to the next generation. It's so important to pick the right trustee, to ensure that you provide for your loved ones in the way that you intend. The trustee should share the same values and goals for the trust that the grantor has.

By making a strong plan for the future, you can keep your legacy safe and set up your own family trust that will protect your wealth for years to come.

Legal Counsel

To establish a family trust, you need to seek advice from someone who understands estate taxes and the many benefits that a trust can provide. An estate planning attorney will know the local and national laws, tax rules and will be able to guide you when you transfer your assets to your trust. They will take a close look at what you own, what you want to achieve, and how your family works, creating a family trust that safeguards all your assets and makes sure your family members are taken care of when the time is right.

The end result will be a trust that will lower taxes, avoid probate and disagreements and maximize the financial benefit to the beneficiaries. Your trust will not be part of the public record and the terms will be kept out of the local register. This ensures the privacy for all parties of the family trust.

Getting Started

Are you wanting to provide for your family, but need help getting started? Our friends at Fasken can guide you through the legal process of creating a family trust. You will have peace of mind knowing that your loved ones will be looked after in a way that benefits them the most, for years to come.

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