Episode #36: Estate Planning: Breaking Down the Importance of a Trust

Episode #36: Estate Planning: Breaking Down the Importance of a Trust

Putting your assets and property in order before your death can have immediate and future benefits. A trust is a necessary tool within the estate planning process that ensures your wishes are carried out and that your family, legacy, and assets are protected. In this episode of Money Script Monday, Joe reviews the aspects of a trust and underscores the purpose of why every individual should have an estate plan in place.


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Video transcription

Hello and welcome back to another episode of Money Script Money. My name is Joe Schweiger and today we're going to talk about the importance of utilizing a trust for estate planning purposes.

The main purpose of a trust is to have someone professionally manage your assets and dispose of them upon your death.

When I look back in recent history, I think of a big failure that's occurred and that's with Michael Jackson's estate. With improper planning, he didn't have a trust in place. Also, I believe he didn't have a will.

It cost his heirs and his family members a very large amount of his estate, a big portion of their time, and unfortunately, that's the last thing grieving heirs want to deal with during that process.

So, when we set up this trust, some of the main benefits are going to include that it gives the deceased, or person, control of their assets even beyond their death. It also will provide that professional management and keep certain assets out of the probate process which, again, can be very lengthy and expensive; with attorney’s costs, court costs, and obviously, hiring any other counsel that you would need there.

Overview of a trust

We're going to start with the actual trust itself and what it looks like.

Trust Overview


A grantor is the person that's going to create a trust. They're going to basically retitle their assets to go inside of that trust.

When we're looking at a trust, all it is is a document, or a piece of paper for that matter, that has specific terms, provisions in there, has the different parties. Again, the main party is the grantor.

And when we look at the spectrum of a trust, we're really going to break it down today into two different forms: A revocable trust and an irrevocable trust. We’re going to talk today more about that revocable trust and what that means for that grantor is they have complete ability and control to monitor the assets that are in there, pull them out if they really wanted to, change beneficiary designations, and have complete control and access to that property.

Trustee and Beneficiaries

The two other parties that are associated with the trust are going to be the trustee and the beneficiaries.

The trustee is going to be appointed by the grantor and usually this could be a professional company or management company that's going to charge a fee.

The relationship that the trustee has with the beneficiaries is a fiduciary one. Meaning they have to act in utmost good faith and place the interests of the beneficiaries above their own at all times, which is obviously a very important aspect of creating that trust.

Now inside of the trust, like I had mentioned, the grantor is going to retitle their assets or property to be owned by the trust and with a revocable living trust, again, has complete access and control over that.

For instance, if you were to put your home, or retitle your home, to be owned by the trust, you don't have to move out of your home just because it's now the trust. You still have complete beneficial enjoyment of that home.

Two documents in conjunction with a trust

When we look at some of the different items that go with a trust, two of the main ones usually planned during the same time are going to be medical directives and a power of attorney.

Medical Directives

Medical directives are important especially for last minute life decisions.

Medical Directives and a Trust

For instance, if you become incapacitated or you have a failure of a certain organ, what type of procedure do you want if any at all?

Sometimes, people don't want to be hooked on life support, so during that medical directive you can actually, grant your doctor authority to pull the plug if that's what you so wanted instead of leaving that tough decision on your remaining heirs.

Power of Attorney

The second thing that normally comes in conjunction with a trust is going to be that power of attorney.

Power of Attorney and a Trust

This is extremely important for people that have assets that require specific management, whether that be distribution or if they have to pay certain bills out of that. Or even for small business owners or business owners in general that their company wouldn't be able to perform without that.

When we're looking at a power of attorney, there are different forms of it and they're not all equal.

  • General Power of Attorney - gives very broad discretion over one's property if you become incapacitated or if you leave the country or if certain events happen.
  • Durable Power of Attorney – gives “durability” to power of attorney and is effective even if you’re incapacitated.
  • Special Power of Attorney – allows you to create and narrow different power of attorneys for different, or special, situations.

These are very important when planning in conjunction with a trust to make sure that your assets are properly managed.

Control beyond the grave

The last thing that we're going to talk about today is that ultimate control that the trust gives to that grantor or the person funding the trust.

Control a Trust Beyond the Grave

What many people don't realize is that you do have control even beyond your grave.

When you pass away, you can still control how those assets come out of the trust because the trust can last for multi generations depending on what type of trust you set up.

(1) Spend Thrift Clause

For instance, if you have a spouse that's going to be the beneficiary of your retirement account and you label that as the trust owned, you can put specific spend thrift clauses in there if you feel that your spouse has a gambling problem or a spending problem where you think they'll spend all those assets down.

That's an important characteristic or provision you could put inside that trust.

(2) Merit-Based Disposition of Corpus

There's also merit-based provisions you can put inside of that trust.

If you have a multi-generational family trust and you want to see your grandkids excel in life, you can put certain provisions in there.

For instance, if they turn 16 and they pass their driver's license, you can give them a certain amount of the trust corpus to buy a car.

If they graduate college and you want to help them maybe purchase their first home, you can then put a merit-based clause in there for that.

If they're going to get married and you want them to go through marriage counseling before, you can put a certain merit-based provision in there, as well.

(3) Control

Again, the main purpose of that part is the control that it gives you long beyond you funding it.

Work with an Estate Planning Attorney and/or Financial Advisor

We started the presentation today with a story about Michael Jackson. Not everyone's going to have an estate that large, but a lot of American families have homes, cars, all sorts of different property that could cause very substantial problems to your heirs if you don't plan properly.

Sitting down with an estate planning attorney or a financial adviser is very important as you start building that family and building assets in your home.

I hope you found today to be very helpful and we look forward to seeing you next time. Thank you.

About Joe Schweiger, CFP®

Joe Schweiger is a Field Support Representative at LifePro. He coaches hundreds of financial professionals on how to build effective financial strategies that achieve their clients' long term goals and helps them stay educated on the latest industry trends.


This information is meant for educational purposes only.

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