I gave my son some money and instructions to take his nephew to the local Community Day Festival. “Play some games, buy some food, have fun, get the bus home.” I got the call some hours later; they needed a ride home. They had no bus fare, they were starving. They had Snow Cones, toys and no money. No big deal. They’re kids, and I was only three miles away. I picked them up, fed them and took them home.
Now imagine this playing out in macro, except that I’m dead and I can’t come for anybody. All I can do is lament and gnash my teeth from whatever post life, other-world plane I’d be watching from. That would be bad for everyone. That is why trusts exist.
Back to our analogy: Imagine that I had sent my daughter along with them. Imagine I had given her a a debit card loaded with money and specific instructions as to what I wanted to happen at the Community Day Festival. The money represents my assets, accumulated over a lifetime. The debit card is the trust. It’s attached to an account that is invested, conservatively, for income and growth. My daughter would be the Trustee. She has no control over the money or investments in the account (the Trustor arranges that), except for it’s distribution. She doles out the money according to my instructions. Those instructions and the choice of trustee, the investment plan and, of course, the trust’s beneficiaries (my son and grandson in this example) are my estate plan. I am the Trustor and I guess the Community Day Festival represents life and the world going on after I’m dead. This example is way over simplified. There are a lot of things to consider in establishing a trust – legal, taxes, investments, et cetera– but I think this gives a clear idea of what a trust is for and why a trust exists and why you might need one (or more) for your estate plan. That first example I gave you, that is what happens if you only have a will.
If you have assets that are not to be left to your descendants, but rather to an institution – a museum or University or charitable organization some such – having a trust to manage that gift is just as important. You wouldn’t leave your art collection or rare books or coins or cash or whatever, with an institution you didn’t trust to care for them properly and according to your wishes. Don’t forget though, boards of directors change. Curators and Executive Directors move on, retire, die. The people you trust today won’t always be there. A well executed trust and honorable trustees will protect your wishes and your stuff so that your legacy isn’t left out, broke, hungry and with no way home.
"The people you trust today won’t always be there."
If your legacy is to persist into perpetuity having some assets held, and growing, in trust might not be a bad idea. You will definitely want to consult professional advisors for this.
William S Jiggetts