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Protect & control your assets with a trust

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Thomas Barwick/Getty Images

There is a common misconception that estate planning is only for exceptionally wealthy individuals. But since it can help ensure your wishes are carried out after you pass away, estate planning is something just about everyone might consider.

A trust is one tool you may utilize in the estate planning process. Simply put, a trust is a legal arrangement that helps you control your property and other assets both while you are alive and after you have died. Consider a few examples in which a trust may be useful:

  • You want to provide for a child with special needs or other circumstances that may require lifelong care.

  • Situations later in life that would affect your ability to handle your personal financial affairs due to a diagnosis.

  • You want to make decisions in advance in the case of a blended family or complicated family structure.

There are different types of trusts and arrangements that can be made within trusts; as one example, a trust can be either revocable or irrevocable. Because of the complex nature of trusts and their potential impact upon your estate plan, it is important to seek the assistance of an attorney when establishing one. An attorney can go through the steps to ensure your trust is created according to your needs and desires. Thrivent does not provide legal or tax advice, but we can partner with you and your tax professional or attorney to provide details on your overall financial strategy at Thrivent.

Trust terms you should know

You will generally hear the following terms when trusts are being discussed:

  • Grantor. The person who sets up the trust, also known as a settlor or trustor.
  • Trustee. The person who has the legal duty to manage the assets in the trust. The trustee is responsible for safeguarding the trust assets for the grantor or beneficiaries, filing tax returns and more.
  • Co-Trustee. One of two or more people who are named trustees in the trust. For example, a spouse may be a co-trustee on your personal trust.
  • Beneficiary. A person or entity that receives the benefit of the assets held in trust.

What is a revocable trust?

Revocable trusts, also called living trusts, are a special kind of estate planning tool that can own your assets while you’re still living—and detail how to distribute it after you pass away.

To establish a revocable trust, you (the grantor) need to have an attorney draft legal documentation for the trust and then transfer assets to it. In revocable trusts, grantors will generally name themselves as trustee during their lifetime and then will appoint a successor trustee who will manage the trust in the event of the grantor’s illness or death.

The grantor retains control during their lifetime and can make changes or even cancel the trust as desired. Your loved ones or charitable organizations you designate will be the beneficiaries of the trust after you pass away.

Some benefits of a revocable trust include:

  • It can help protect you now. If you’re unable to manage your own financial affairs due to a temporary or permanent disability, your trust can address how your assets are to be managed and by whom.
  • It typically avoids probate. Probate is the court procedure for collecting a decedent’s assets, liquidating liabilities, paying taxes and distributing property to heirs, carried out by a personal representative or executor under the supervision of the probate court. Since your trust details how assets should be distributed to beneficiaries, your heirs typically can bypass probate court.
  • You can maintain privacy. Probate court proceedings are a matter of public record. By keeping your estate planning within the confines of a trust, you ensure privacy of your financial wishes.
  • It fulfills your wishes upon death. The trust identifies your chosen beneficiaries and details for how your assets are distributed.

What is an irrevocable trust?

An irrevocable trust is generally one that cannot be modified after it is created (with some exceptions), unlike a revocable trust, which provides options for changing the terms while the grantor is still alive. So, generally, a grantor in an irrevocable trust gives up control of assets contributed to it.

Irrevocable trusts are often used to fund legacies for children or grandchildren, or to make gifts of property or life insurance.

What’s the difference between trusts & wills?

Wills and trusts are two different instruments that can be incorporated into an estate plan—and the key difference is when each of them takes effect. Whereas a will details your wishes after death, a revocable trust becomes effective immediately. It allows your designated successor trustee to carry out your instructions if you no longer can.

Your will, on the other hand, may appoint a guardian for your minor children and include specific instructions for their care in the event of your death. A will may also contain your wishes for a memorial service, burial and/or details about how cherished possessions and keepsakes should be distributed to loved ones.

Another difference is that assets within a trust remain private while a will becomes public at your death and may be subject to probate.

Be sure to speak with your estate planning or legal professional about whether a will or trust (or a combination of the two) is sufficient for your particular situation.

What assets are included in trusts?

Once a trust is created, you can move your assets into it, some of which may include:

  • Investments
  • Real estate
  • Bank accounts
  • Personal property (such as vehicles, artwork and more)

While retirement accounts, including IRAs and 401(k)s cannot be placed in a trust, you may name the trust as beneficiary of those accounts.

Your tax and legal professionals can help you determine which assets to include while helping you avoid unintended federal or state income tax consequences. Be aware there are legal fees for establishing the trust and ongoing administration.

How to get started

No one can predict the future with any certainty. But you can take steps to protect yourself and your loved ones. Consult your team of skilled professionals, including your Thrivent financial advisor, estate planning attorney, tax advisor and trust officer as you develop or modify your overall estate plan.

Don’t have a Thrivent financial advisor? Connect with someone today.

Trust and investment management accounts and services offered by Thrivent Trust Company are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, nor guaranteed by Thrivent Trust Company or its affiliates, and are subject to investment risk, including possible loss of the principal amount invested.

Trust and investment management accounts and services offered by Thrivent Trust Company, a subsidiary of THRIVENT FINANCIAL, THE MARKETING NAME FOR THRIVENT FOR LUTHERANS and an affiliate of Thrivent Investment Management Inc. Neither Thrivent Investment Management Inc., a FINRA and SIPC member, nor its associated person(s) is offering any product hereby. Certain Thrivent Investment Management Inc. associated persons refer prospective clients to Thrivent Trust Company.