What Do Trusts and Burger King Have in Common?

David Larson |

Congratulations!  You have worked hard to save and to provide for your family and are now enjoying a comfortable lifestyle.  You are well on your way to a retirement spent with the people you love on your own terms.  These blessings have also allowed you to give to the organizations and nonprofits you believe in.  Years ago, you envisioned a successful retirement, and you are at the peak of the mountain!

But there is a problem!!!  For years, you have been focused on climbing to the top of the mountain… and now it’s time to begin thinking about your descent. Life has become more complex, and you want to make sure that you are doing everything possible to ensure your values pass on to the next generation. You don’t want to leave behind a sea of paperwork and complexity after you are gone. 

Financial planning should not be complicated – your assets should pass seamlessly to your beneficiaries. However, in our experience working with clients in Harrisonburg, Virginia and throughout the country, we have seen that many people fail to plan for the last leg of their journey, and as a result, too much of their estate could be spent on taxes, or even worse, could go to the wrong person.

Trusts can often be a good solution to help you meet your goals.

But first, please understand that trusts are not for everyone.  Many times they are unnecessary and only add complexity and confusion.  Any good estate plan should be easy to explain without excessive paperwork.

While trusts are not for everyone, they can play a vital role in an estate plan.

Even the word “trust” can be intimidating to people not in the financial world.  If it helps, you can almost always substitute “trust” with “basket” when describing one.  Essentially, you put your money in a basket and then decide who controls it.  You can remain in control of it, or you can name someone else.  Here’s a very simple breakdown of some of the more common types of trusts:

Revocable living trust. These trusts are relatively simple to create and can hold personal property, real estate, investment accounts, and more. All of the income from this trust flows through to you as a taxpayer. You have a great deal of flexibility in how you set this up to benefit your beneficiaries. For instance, you could restrict income from the trust so that your beneficiaries get the money at a certain age, or you could set the trust up so that the money can be used for certain purchases, such as education or a house down payment.

Special needs trusts.  If someone you love is currently qualifying for SSI or other similar government benefits, then you may want to speak with an attorney about setting up a special needs trust. These types of trusts are often created so that your loved ones can maintain their quality of life and still qualify for government benefits. A special needs trust can allow them access to some of your resources once you are gone, while still maintaining the government benefits that they need.

Irrevocable trusts. These trusts are not nearly as common now as they were just a few years ago because the estate tax landscape has changed.  The most common reason people set up irrevocable trusts is to give away assets while they are living to minimize estate taxes after death. As of 2020, each taxpayer can pass on over $11 million free of estate tax, so many people should tread lightly if considering setting up an irrevocable trust now.

So how is a trust like Burger King?  YOU CAN HAVE IT YOUR WAY!

But just because you can have it your way, it doesn’t mean you should.  Many people do not need trusts, so do not needlessly over-complicate your life.  Maybe you should go to Wendy’s or eat at home.

Although we do not draw up these documents, the Larson Wealth Management team is very familiar with estate planning and wealth transfer strategies. We have been having these discussions for nearly 20 years.  If you are considering a trust or have not updated your estate plan recently, here is what you should do:

  1. Make a list of all assets, along with the values of each one and where you want them to go once you are gone.
  2. Meet with your financial advisor or attorney to determine if a trust is necessary based on your goals and family dynamics.
  3. If you decide a trust will help, meet with a qualified local attorney to walk you through the process.  Make sure you meet with someone who specializes in estate planning.  Just because an attorney can draw up a trust, doesn’t mean he/she should draw it up.
  4. Review and update the trust when major life events happen.  

For more helpful content, please visit our blog page or video page on our website for similar articles or videos to help you plan.  We also have created guides free for you to download, such as Five Tax Strategies Retirees Often Overlook and Six Mistakes Grandparents Often Make