Finance: Understanding Trusts

Understanding Trusts By Lauren Caggiano So many financial decisions are about setting up your future self and family for success. Trusts are designed to help you protect your wealth today and maximize your legacy for future generations. What is a trust and why is it important to set one up? Erika Dornseif, VP, Senior Trust Officer with STAR Financial Bank, offers insight into this financial matter.

A trust is a fiduciary relationship in which one party (the grantor) gives a second party (the trustee) the right to hold title to property or assets for the benefit of a third party (the beneficiary).

Speaking of benefits, there’s an incentive to get one’s financial health in order by setting up a trust.

“I think it’s important for women to also understand a proper estate plan,” she said. “Mothers are pulled in many directions, but they should know how a trust or an estate plan works for them.”

There’s also peace of mind. Having a trust provides more flexibility and it protects you and your family. Convenience is a factor, too.

“A trust can provide investment management, such as managing the actual assets for you,” she said. “We see this a lot with our older clients, where it’s just the surviving spouse. The wife remains, and she becomes disabled or starts to get dementia. If that trust is already set up and in place, we can provide the investment management services but also do the bill paying for her so the family doesn’t have to.”

The result is that it simplifies your estate assets for administration for the surviving family.

But to get to this point, you need to do some work on the front end. A trust must be set up by an attorney. Fortunately, as Dornseif notes, there are many capable ones in the area who will sit down with you to develop an estate plan.

“They will review that stuff with you and decide if you need a trust, if you need a living will, and a power of attorney, etc.”

Also know that it’s never too soon to set up a trust, especially if you have children.

“Getting a trust set up at an early age is a good idea because if you have an unexpected death, having an estate plan will ensure children are taken care of. Do you have a vehicle set up to manage your assets for your children after your death? That’s why everybody needs an estate plan.”

When she said everybody, she’s sincere about that. Contrary to popular belief, you don’t have to be ultra-wealthy to set up a trust. Most people have some assets. It’s just a matter of scope and scale.

“When you die, there are assets that are going to have to be settled, and it doesn’t have to be half a million dollars. You could have a $250,000 estate —that’s a lot of money to somebody,” Dornseif says. a

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