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Trust Services | Advantages

Professional Investment and Asset Management

First, by forming a trust, an individual who is not adequately trained or who simply does not have the time needed to manage his or her assets can shift management responsibility to someone who does. By doing so, it will both reduce stress to the individual and ensure that all assets and income are being managed professionally and efficiently.

Avoid Problems Upon Disability

Second, if the grantor is suffering from a physical or mental disability, or may be in the future, the formation of a trust avoids the need for a court-appointed guardian to oversee the grantor’s assets and maintains confidentiality of those assets upon his or her disability by not subjecting them to public proceedings.

Avoidance of Probate Procedures

Third, trusts allow for the avoidance of lengthy state probate procedures. By avoiding probate, the individual can assure quicker distribution of trust assets upon his or her death and will reduce or eliminate traditional probate costs. Also, by avoiding probate, grantors will be able to keep trust matters confidential, as opposed to probate proceedings, which are a matter of public record. Finally, use of a trust helps to avoid ancillary probate in other jurisdictions if the grantor owns property in states other than the one in which he resides in upon death.

Greater Control and Flexibility

A trust can be amended at any time: therefore, a grantor can add or remove assets at his or her discretion and can change the underlying investment strategy throughout his or her life as required. The enhanced flexibility of a revocable living trust is highly beneficial because a grantor’s personal circumstances can, and often do, change after formation of the trust.

Protection of Beneficiaries

By forming a trust, only those beneficiaries specifically named in the trust agreement will be eligible to receive the trust assets upon the grantor’s death. Therefore, the grantor has the ability to give his or her property to those beneficiaries of his or her choosing. Also, a trust is not as easily challenged as a will due to the fact that it was established and operating during the grantor’s lifetime and the trustee had an ongoing relationship with the grantor.

Tax Consequences

Often times, trusts are formed mainly for their non-tax advantages. Thus, upon transfer of a grantor’s assets to a trust and upon his or her death, there are generally no income, gift, or estate tax advantages to the grantor or his beneficiaries. Also, under some circumstances, §212 of the Internal Revenue Code will allow the grantor to deduct certain fees and commissions incurred in the operation of the trust.

Preparation of Income Tax Returns

With regard to revocable living trusts, the trustee is required to file a U.S. Fiduciary Income Tax Return (Form 1041) on behalf of the trust, which reports the trust’s income tax items and supplies information for trust beneficiaries to report on their individual tax returns.