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As families gather for the holidays, talking about long-term financial security and trusts may not be top of mind. Death and finances are often two of the most uncomfortable topics for families to talk about. Yet not talking about them can lead to severe and sometimes devastating consequences.
Planning before either death or disability is the best gift you can give your family.
Family members may be embarrassed to broach the topic of money, but also may not understand basic financial strategies, such as establishing trusts. There is a common misconception that trusts are only for wealthy families or for protection from taxes. While taxes are an important factor, most families appreciate the ability to protect their loved ones from predators and creditors over the long term. Regardless of your family’s net worth, a trust will enable you to better protect your family and assets.
Trusts are vital to help support people throughout their lifetimes and to put plans in place for the next generation. Creating a trust gives you control over where your assets go and when your beneficiaries can access them. Properly structured, a trust can benefit generations without being subject to an estate tax. An often-overlooked benefit of a trust is the ability to protect your family’s privacy by avoiding both the cost and public nature of probate court.
Of course, trust planning involves much more than numbers on a spreadsheet — it also involves family dynamics. When you combine money and family, things can veer off track. Preparing for the emotional aspect of trust planning will make the entire process easier for everyone.
Here are four important elements to consider when planning a trust:
1. Lay the groundwork early
As a parent, you can start communicating your financial values to your children early on. When parents frequently share their philosophy about money with their kids, they lay an important foundation. That makes the family better equipped for estate planning discussions later.
You can start with your children at a young age by communicating the value of saving, financial planning and even philanthropic giving, if that is important to you. Teaching your children that financial security takes planning and care will help them understand your choices and set them up for success in their own lives. It will also establish a basis for open and honest conversation around finances. If money talk hasn’t been common in your family up until this point, fear not. Just make it a priority to start these conversations as soon as you can.
2. Approach the topic with respect and care
When initiating a conversation about trust planning, it’s important to be candid and considerate. Financial discussions can sometimes make people uncomfortable, confused or concerned, so try not to catch anyone off guard. If parents are broaching the subject with their adult children, they can say, “It’s important that we talk as a family about the future. We want to make sure we’re able to take care of ourselves financially as we get older, and that means it’s time for us to share our hopes and expectations with you.”
Conversely, adult children might be the ones to initiate trust-planning conversations with their aging parents, often spurred by a catalyst such as a health scare or coming surgery. When this happens, perhaps start the discussion along these lines: “Mom and Dad, your health and happiness are important to us. We want to make sure there are resources in place to support you in the years ahead. Let’s work together to avoid getting caught up in a scenario where we need to help you navigate medical issues but aren’t able to work on your behalf.”
3. Tap in to third-party estate plan help
Even in the most highly functioning families, discussions about financial matters can get difficult at times, especially if they don’t happen until the family is in the emotional midst of a personal crisis, such as illness or a death. Disputes between siblings or misunderstandings may arise when people are left in the dark. The best way to mitigate feelings of discomfort is to have conversations early, prior to a devastating event, and involve a third party to facilitate honest discussions and help take the emotion out of it. Without that refereeing, emotions can take over.
Not sure where to turn? Your bank can help. Having a relationship with your bank and letting it evolve over time will allow you to build a relationship and gain trust for those who will be able to help long term. Engaging a professional fiduciary to sit alongside you and your family will allow you to worry about what’s important — the family relationship — while allowing the professional fiduciary to ensure all the technical aspects are in order. A fiduciary (trustee), whether an individual or bank, is held to the highest standard and must work in the best interest of the beneficiary above everything else.
If you don’t already have a relationship with your bank, simply reach out to a personal banker and request a referral to help with estate planning.
A financial professional can guide you and your family through the entire trust-planning process. While you’ll need to select an estate planning attorney to draft the actual legal documents, a financial professional can help you prepare for that meeting, help you understand what to expect and perhaps most important, help you understand the practical applications of the legal document. They can also coordinate family meetings and reach out to individual family members along the way, if that’s something that might be helpful.
Your financial professional does not replace your other trusted advisers, including your estate planning attorney and tax adviser. Rather they work alongside them to ensure your entire team is working together to meet your goals and objectives.
4. Remember the endgame
Successfully navigating family dynamics and establishing your trust plan is an important financial accomplishment. While the process might seem daunting at times, keep moving forward. Rely on your professional team of experts to coach your family through the process and try to view the experience as a way to draw your family even closer together.
The bottom line is for families to stick with it. It’s worth the minimal investment of time to establish your trust plan. The result is being able to enjoy the immense peace of mind that comes with having a trust in place.
Nora Garvey has been a Trust Advisor for 25 years and is currently the Wealth Trust Advisor for the Chicago Private Wealth Management Group at U.S. Bank.
Investment and Insurance products and services including annuities are: Not a Deposit Not FDIC Insured May Lose Value Not Bank Guaranteed Not Insured by any Federal Government Agency
U.S. Bank and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal adviser for advice and information concerning your particular situation.
