Trusts Solve Client Needs and Add Value to Wealth Plans

Some think that trusts are used only for end-of-life planning. Trusts, however, are like wrenches: they come in a wide variety of shapes and sizes, each particularly suited to a particular need. Some are for wealth accumulation while others are for wealth preservation, and still others are designed to protect future generations. You will see, we look at some of the kinds of trusts that can be employed to deal with particular client concerns and needs and how they fit into a client’s overall wealth accumulation and preservation plan.

Key Takeaways:

  • Trusts address a wide range of clients’ financial and wealth-management needs.
  • Trusts are compatible with clients’ investment programs.
  • In addressing client needs, trusts add value to the overall plan and may provide important net cash inflows.
  • For more complex and strategically important clients, an integrated trust program often significantly enhances the total benefit achieved by the wealth plan.

Wealth Accumulation and Preservation and the Role of Trusts

Clients deploy their dollars to achieve wealth accumulation and preservation. Some of those deployments are classified by accountants as “investments,” because they are a transformation of cash into something that can be sold for cash. “Investments” are things like cars, houses, stocks, bonds, mutual funds and life insurance cash value. Others deployments are classified by accountants as “expenses,” because what they buy cannot be sold for cash. “Expenses” are things like property and casualty insurance premiums, mortality costs of life insurance, and fees to doctors, attorneys, accountants, financial advisors and insurance agents. Both wisely made “investments” and wisely incurred “expenses” are key to successful wealth accumulation and preservation.

For wealth preservation and accumulation strategies, an estate attorney is an essential member of the client’s team. The selection, creation and effective use of trusts is such a strategy because selection of a trust strategy involves giving legal advice, which only attorneys can lawfully do, just as only licensed financial advisors can lawfully sell securities.

Just as a financial advisor makes investment recommendations after considering a range of possibilities, an estate attorney makes a trust recommendation only after analysis of the client’s needs and goals, and whether they can be best met by a particular trust strategy. To achieve wealth preservation and growth, clients make up front investment in the form of legal fees, financial advisor fees, accounting fees, and asset purchases. Then, with continuing management and monitoring, financial rewards accumulate over time. The value the trusts and estate attorney provides to the client and the wealth planning team is his or her specialized knowledge, experience and wisdom.

Trusts Provide a Robust Set of Benefits

Different types of trusts are used to target specific client needs and objectives, just as different classes of investments play a specific role in the client’s wealth preservation and growth strategy.  A trust’s specific provisions will use tax, asset protection and other laws to meet client needs with precision.

In wealth planning, it is critical to remember that a dollar saved through taxes not paid, expenses reduced, or losses avoided has the same effect as a dollar of investment return. By effecting client expense and tax savings and risk avoidance, trusts create efficiencies that increase clients’ overall net profits across time.