Trusts and Other Tools You Can Use to Protect Your Family’s Wealth

There are many Phoenix-area workers and soon-to-be-retirees who understand the often precarious nature of generational wealth. If you’re experiencing restless nights worrying about both foreseen and unpredictable threats to the wealth you’ve spent a lifetime accruing, you’re not alone.

Many people fail to make full and proper use of all the estate planning and wealth protection tools available to them, often because an unexpected accident or health emergency cuts short the time they thought they had. The inescapable reality is none of us knows exactly what the future holds, and it’s always preferable to be prepared today.

Estate planning tools like trusts are intended to insulate you and your hard-earned wealth from those unexpected events and the long, greedy arm of the government.

What Are Trusts?

Trusts are essentially agreements where an individual, the settlor, transfers assets to a separate entity, the trust, to be managed by trustees for the benefit of beneficiaries. They can be versatile, offering control, tax efficiency and protection against potential future creditors.

Types of Trusts for Wealth Protection

Revocable Versus Irrevocable Trusts

• Revocable Trusts: These can be changed or terminated by the settlor during their lifetime. They're great for avoiding probate but might not offer the same level of asset protection or tax advantages as their irrevocable counterparts.
• Irrevocable Trusts: Once established, these cannot be easily changed. They're especially effective for asset protection and offer a host of potential tax benefits.

Special Needs Trusts

For families with disabled members, a special needs trust ensures that the beneficiaries can still qualify for government aid while having access to assets in the trust for additional needs.

Charitable Remainder Trusts

These allow you to contribute assets to the trust and receive an income stream in return. At the end of the trust term, the remaining assets go to a charitable organization.

Generation-Skipping Trusts

Ideal for those who wish to leave assets to their grandchildren, skipping their children. This type of trust can help avoid estate taxes that could otherwise apply multiple times.

Other Essential Wealth Protection Tools

Estate planning documents are not mutually exclusive. Trusts are not one-for-one replacement for a will. Different estate planning tools accomplish unique goals or offer specialized protections your family won’t enjoy by relying solely on one document.

There are also time considerations to factor into your estate planning decisions. Certain life milestones or events may spur you to add to or modify your existing plan. For example, a young family may want to establish a trust after buying a home or welcoming their first child. It’s also important to update your trust, will, power of attorney and other documents as your life changes, such as after the birth of a child, divorce or remarriage.

There’s no one-size-fits-all estate or retirement planning solution. Consulting with retirement planning professionals, especially those who work closely with estate planning attorneys, is often beneficial for Phoenix retirement planners who want to learn about all their options and how these various estate planning tools work synergistically to safeguard assets and minimize tax liability.

What Are Wills?

A foundational estate planning tool, a will determines how your assets will be distributed upon death. It's an essential document for everyone, regardless of their wealth level. Things like power of attorney and healthcare directives are important at any age. Simply put, everyone should have a will, even if you have a trust.

Power of Attorney

This legal document allows you to designate someone to act on your behalf, typically in financial or medical decisions, should you become incapacitated.

Family Limited Partnerships (FLPs)

FLPs let families pool their assets into a single entity. This can provide asset protection, centralized management and potential tax benefits.

Life Insurance

A well-structured life insurance policy ensures that your loved ones receive a tax-free payout upon your demise, providing them with financial stability.

Business Succession Planning

For business owners, planning for the transfer of your business upon your retirement, incapacity or death is crucial. It helps ensure that the business continues smoothly and can provide for your family.

Annual Gifting

To reduce the size of your taxable estate and help your heirs now, consider annual gifting. It allows you to give a certain amount to as many individuals as you like each year, tax-free.

Making the Right Choices

People shouldn’t feel as if they must follow a pre-determined rubric of estate planning. Every person and family is different and it’s important to develop and implement a plan that’s right for your goals and where you’re currently at in life.

While some retirement planners have dedicated decades to growing their wealth with the express goal of passing it on to their children or grandchildren, others prefer to pass their savings on to charities or organizations that align with their worldview or causes relevant to them. There’s no right or wrong answer, especially when it comes to wealth you’ve earned through your own efforts.

Finding a team of retirement planners, investment managers, tax professionals and estate planning lawyers who can work together to develop a comprehensive plan customized to your needs is often the best way to ensure your goals and desires are faithfully executed.

Our Phoenix Financial Planners and Estate Planning Partners Are Here for You

Protecting your family’s wealth requires a proactive approach, strategy and the right tools. Trusts stand out as a powerful instrument, but they're just a part of the picture. Combining them with other wealth protection and transfer tools can ensure your assets are preserved, managed efficiently and passed down in line with your wishes.



Contact the team at Fullerton Financial Planning at (623) 974-0300 to learn about your options.