Revocable Trusts May Be the Solution to Your Client’s Needs
From: wealthmanagement.com
A revocable trust-centered estate plan offers many benefits a plain old last will and testament can’t.
A revocable trust-centered estate plan offers many benefits a plain old last will and testament can’t. Trust-centered plans are better for clients and make your work easier. Understanding the benefits of trust-centered planning will position you as the trusted advisor who can spot the issues and implement solutions.
How Your Practice May Benefit When Your Clients Use Revocable Trusts
You can retain assets under management:
- Assets will be kept private so your competitors and other predators don’t know who inherited what and how to contact them.
- Avoiding probate often reduces settlement costs significantly, leaving more assets for beneficiaries and for continued management.
- Assets held in trust can be protected against dissipation from lawsuits, divorces, bad decisions and addictions, and these assets need continued management.
You can have better client relationships:
- Clients will value your help in keeping their assets and family out of guardianship and probate courts.
- Clients will value the importance you place on keeping their final wishes private.
- Clients will appreciate your comprehensive approach to their financial planning and refer family and friends.
- You will be able to immediately work with an incapacitated or deceased client’s trusted family member or friend rather than waiting until the court decides it’s okay to get started.
- You will become the trusted advisor who sees the big picture and knows all of the pieces of the client’s financial and estate plans.
Four Investment Management Advantages of Revocable Trusts
#1 – Revocable Trusts Help You Faithfully Implement Your Investment and Distribution Strategies. Custodians freeze accounts owned individually by a decedent, which can complicate your asset management process, especially if you’re tactical or are making periodic distributions. But revocable trusts with co-trustees or successor trustees can be managed seamlessly, without the need to open another account and transfer assets.
#2 – Revocable Trusts Simplify Management of Illiquid Alternative Assets. This is especially true of real estate, private equity and private debt. Normally it is much simpler to alert an issuer/sponsor about a change in the acting trustee(s) than to retitle such assets, especially since many sponsors fail to offer Transfer on Death provisions. And, if these investments are spread across multiple states, a revocable trust also avoids opening probate in each jurisdiction.
#3 – Revocable Trusts Reduce Paralysis or Rash Changes During Times of Grief. Grieving surviving spouses often either suffer decision-making paralysis or opt for wholesale investment strategy changes. By holding assets in trusts, you lighten such clients’ decision-making load during a stressful time and help them avoid rash changes instigated by new account and transfer paperwork. Depending on the mix of assets and the current market price, premature liquidation may produce a disappointing outcome.
#4 – By Helping Surviving Clients Avoid Rash Changes, You Add Tax Alpha. While all the assets in some revocable trusts may enjoy a step-up in basis, in many cases those notionally owned by the surviving spouse will not. If their basis is low and a surviving spouse opts for a wholesale sell-off, it may lead to unnecessarily large capital gains taxes.
