Financial Planning Around Trusts

Trusts Financial Planning image for family business investment advisers McRae Capital Management.
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. Trusts can be used to pass assets to future generations, avoid probate, preserve financial privacy, and donate to charity. McRae can manage a trust to produce income for the current beneficiary and growth for future beneficiaries.  We can work with your estate lawyers and accountants to develop a plan that works for you and your family.

  • Marital Trust or “A” Trust
    • A marital trust is created for the benefit of a surviving spouse.  The trust remains in the estate of the surviving spouse
  • Credit Shelter or “B” Trust
    • A credit shelter trust is created to bypass the surviving spouse’s estate to utilize the full federal estate tax exemption for each spouse
  • Irrevocable Life Insurance Trust
    • As the name states, this is an irrevocable trust that is used to purchase life insurance.  Upon the death of the insured, the insurance proceeds avoid inclusion in the estate and can be used for estate costs or to be passed to trust beneficiaries.
  • Generation Skipping Trust (GST)
    • Using the GST exemption, a GST allows assets to pass to grandchildren or later generations without incurring estate taxes upon the death of your children.
  • Charitable Trusts
    • There are several trust strategies that allow you to donate to a charitable cause, yet still produce income for yourself, or benefits for your beneficiaries.
  • Qualified Personal Residence Trust (QPRT)
    • A QPRT is a special kind of trust where the grantor gifts their home to an irrevocable trust and removes the value from their estate.  The grantor lives in the residence for a specified period of time after which the beneficiaries of the trust, often the grantors children become owners of the trust.

Trusts are either revocable, or irrevocable. McRae Capital Management manages and helps administer a wide variety of trusts.

  • Revocable Trusts
    • Also known as a living trust, a revocable trust can help assets pass outside of probate, yet allows you to retain control of the assets during your (the grantor’s) lifetime. It is flexible and can be dissolved at any time, should your circumstances or intentions change. A revocable trust typically becomes irrevocable upon the death of the grantor.You can name yourself trustee (or co-trustee) and retain ownership and control over the trust, its terms and assets during your lifetime, but make provisions for a successor trustee to manage them in the event of your incapacity or death.Although a revocable trust may help avoid probate, it is usually still subject to estate taxes. It also means that during your lifetime, it is treated like any other asset you own.
  • Irrevocable Trusts
    • An irrevocable trust typically transfers your assets out of your (the grantor’s) estate and potentially out of the reach of estate taxes and probate, but cannot be altered by the grantor after it has been executed. Therefore, once you establish the trust, you will lose control over the assets and you cannot change any terms or decide to dissolve the trust.An irrevocable trust is generally preferred over a revocable trust if your primary aim is to reduce the amount subject to estate taxes by effectively removing the trust assets from your estate. Also, since the assets have been transferred to the trust, you are relieved of the tax liability on the income generated by the trust assets (although distributions will typically have income tax consequences). It may also be protected in the event of a legal judgment against you.

Setting up managed trusts helps take care of one of the many life stages where smart financial planning can make a difference. If you’re interested in learning more, please read the section on Trusts in our Estate Planning Commentary.
McRae Capital Management brings decades of long-term investing experience to bear for families, individuals, and corporate clients. If you have questions about anything, from general family budgeting to complex tax issues, from divorce to inheritance, from planning for college to planning for retirement and everything in between, just download our brochure or give us a call at 973-387-1080.


Connect your finances to what matters most

Experience our personal approach to investing