With Eleanor Blayney, CFP Board, Directions for Women, Author – Women’s Worth
In her book, Women’s Worth, Eleanor Blayney, author and Consumer Advocate for the Certified Financial Planner Board of Standards, breaks through the traditionally male-dominated field of financial advice to offer insights and information that women can use to make the most of their financial lives. Her approach blends practical advice with easy-to-do exercises that will help you understand your beliefs about money, learn the fundamentals of financial planning, and gain confidence in your financial know-how.
Today, however, Eleanor joins The Steve Pomeranz Show to talk about trusts and their benefits. In introducing Eleanor, Steve notes that one of the most common questions he's asked is whether one should set up a trust for themselves and their assets. Is a trust the best way to pass money onto the next generation or to take care of the financial needs of someone else? Many of these same folks also have the impression that trusts are only relevant to the rich. Eleanor argues against this stereotype, asserting that trusts aren’t just for the wealthy, but may also be a good option for anyone with an “interesting” or perhaps “complicated” life. In situations where someone has been married more than once, for example, or has children with multiple partners, setting up a trust can ensure that more complicated directives on leaving specific assets to specific beneficiaries meeting specific conditions are followed.
Steve asks Eleanor whether there is a simple test to determine whether a trust would be suitable for you and your estate. Her answer is that it comes back to the complexity of how you want your estate parceled up and distributed. Time is also a factor as well, how long you want your assets to last, which we discuss at the end of this summary. The more you find yourself wanting to add more detailed instructions about particular assets and beneficiaries—placing “if, and, or but” conditions on gifts to be bequeathed—the more you should consider a trust as the most reliable way to accomplish that.
Trusts come in two main types: irrevocable and revocable. Revocable trusts can be updated and assets added, subtracted or redirected anytime the trustor wants. (The trustor is the person who set up the trust who is also often the trustee until incapacity or death.) These are sometimes called “living trusts.” Provisions are frequently included that provide directions for what to do when the trustor becomes incapacitated or is otherwise unable to perform these duties. In most cases, the trust becomes irrevocable after the death of the trustor/trustee, meaning that no new assets or instructions can be added to it.
One of the main reasons for setting up trusts is to avoid probate, a court-supervised process of interpreting a will and instructing an executor on how to distribute assets. Trusts are private affairs handled by trustees, while probate entails the creation of a public record. This can have various negative effects, including inciting family members or others to contest the will or merely to stir up jealousy and resentment.
There are other specialized types of trusts that can be set up to define the terms of passing on assets to certain individuals. One of these is a “special needs” trust. This is designed to provide long-term care for children that parents believe will not be able to achieve financial independence.