Monthly Archives: July 2012

Planning your trust: what are the ingredients?

What are the ingredients for trust planning?

Selecting the trustee is central to every trust planning. On this topic, see the post from June 2, 2012, regarding selecting a trustee.

When does money or assets come out of the trust for the beneficiary? Often it helps to distinguish between trust income (such as rent, interest, dividends) and trust principal. For both income and principal, choices include for the beneficiary’s:

  1. Health
  2. Education (as you define it)
  3. Support
  4. Maintenance
  5. Help with buying a home (with rules and limitations)
  6. Help with starting a business (with rules and limitations)
  7. Help with the education of the beneficiary’s children
  8. Incentive for pursuing education or career paths

For some beneficiaries, the best choice is a discretionary trust, where the trustee uses its best judgment in deciding when and how to distribute trust income or principal for the beneficiary. This is often true for beneficiaries with special needs or those who are immature or not trustworthy.

Of course, the ingredients for any trust include tax planning based on the likely assets, income, expenses, and dynamics of the trust. The tax concerns may include income, estate, real property, or generation skipping tax.

How can the trust help your intended beneficiaries reach their potential? That varies from for each trust and each beneficiary.