Putting a trust to work for you

Trusts mean different things to different people and can be used to accomplish a variety of different goals. To establish a trust, the person creating the trust, the grantor, names someone to manage assets, the trustee, on behalf of individuals and/or charities, the beneficiaries, in accordance with the terms of the trust agreement. Within this arrangement, trusts are flexible and can be drafted to accomplish many different goals.

Goals that trusts help accomplish:

• Provide for needs in case of illness or incapacity. A revocable trust can be used to establish a plan for the management of your assets in the event you become incapacitated. The trust sets out the terms for the trustee to use the trust funds. The trust terms can set one or more priorities that the grantor intends for the trust to accomplish. For example, if other family members rely on your financial support, the trust can be drafted so that the trustee can take care of you AND continue support for your family in the event of your incapacity.
• Transfer wealth to heirs outside of probate. An executor named in a will does not have the full power to administer an estate until clerk and master (or appropriate person) grants the executor authority following the submission of the will to probate court. Additionally, wills admitted to probate become part of the public record. For these reasons, some individuals prefer to avoid the oversight of probate court during estate administration. By creating a revocable trust and titling all assets in the name of that trust, the grantor creates a plan where the trustee handles the transfer of assets and does not need to open an estate through probate court. This may allow for more privacy and immediate action following death.
• Reduce potential estate tax liability. For high-net-worth individuals above the federal gift and estate tax exemption ($15 million per person beginning in 2026), an irrevocable trust can be used to remove assets out of a taxable estate. The assets can grow outside the grantor’s taxable estate without using additional exemption amounts after the initial transfer, helping to reduce or eliminate estate tax at the grantor’s death.
• Provide tax-efficient gifts to charities. If you would like to make a gift to charity, you may be able to make that gift in a trust for a tax benefit. For example, you have an appreciated asset, such as an individual stock with a low basis, that you wish to sell. If you sell the stock, you will be responsible for the capital gains tax from the sale. However, prior to the sale, you may be able to contribute that asset to a charitable trust and have the trustee sell the stock. The proceeds can be used to provide an income stream to you or your family with the remaining amount going to charity. There are multiple types of charitable trusts that can ensure that the organizations you want to support are supported in the way you determine.
• Provide a lasting legacy. Trusts can be set up to last for generations. If you have assets that you want to be used to benefit individuals both now and in the future, a trust allows you to give detailed instructions over how assets are to be managed and distributed. You can provide strict instructions, such as a beneficiary should only receive a set amount every year, or grant broad authority to your trustee, so that the trustee can use the assets in the beneficiaries’ best interests based on the circumstances at the time of distribution.
• Protect wealth from beneficiary’s creditors and predators. We cannot predict what stage of life our beneficiaries will be in at the time of inheritance.

By placing an inheritance in trust, the trustee can help protect vulnerable beneficiaries, such as minor beneficiaries, beneficiaries with special needs or beneficiaries who struggle with addiction issues.

Additionally, individuals outside those vulnerable populations may benefit from creditor protection if faced with a lawsuit or a divorcing spouse.

If you are interested in accomplishing one or more of the above goals, the first three rules in putting a trust to work for you are:

• Articulate goals that may be accomplished through a trust: Privacy? Multi-generational asset protection? Reduce estate tax liability? Incapacity planning? An estate planning attorney needs to understand your goals in order to select the right type of trust.
• Choose experts to help you select the best tools and properly set up your trust or trusts. You should partner with an attorney who specializes in trusts and estate.
• Determine who should administer the trust. Individuals and corporations like The Trust Company of Tennessee can be named to serve as trustee. Individual trustees often know the beneficiaries well. Corporate trustees have dedicated teams with expertise in trusts and built-in succession plans.

The Trust Company of Tennessee’s personal trust department offers dozens of years of experience and expertise across all types and phases of trust administration. Our team understands the nuances of different scenarios and trusts, so that when we are named as a trustee, you can rest assured that we will properly carry out the activities of the trust in a fiduciary capacity. If you are interested in naming a corporate trustee, we would be happy to have a conversation about your individual goals and how we administer trusts.