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How can trusts help me achieve my wealth goals?

Trusts can help pass along family values as well as wealth. They can also help you avoid future conflicts about how assets are distributed, protect your beneficiaries from creditors and preserve your assets by reducing your tax liabilities.

Trusts also generally let you bypass probate, thus avoiding public attention and expediting the distribution of assets.


Legally, a trust is a contract that determines when and to whom money will be paid.

In practice, trusts are versatile planning instruments that allow you to be very specific about what you want your money to accomplish in the future.

They come in many forms and can be structured to meet a wide variety of needs.


All trusts include the following three elements:

Grantor: The person or institution that transfers the assets into the trust. If you choose to create a living trust for your children that is funded with stocks or other assets, you are the grantor.

Beneficiary: Each person or institution receiving money or other assets from the trust, according to the terms established in the trust documents, is known as a beneficiary.

Trustee: A person or institution assigned the duties of maintaining, investing and distributing assets in the trust. This responsibility falls on one or more named trustees. The trustee is the legal owner of the trust assets.


Gifting wealth within the family is a common way individuals transfer their estates. Trusts are flexible enough to allow you to plan for multiple members of your family and even across multiple generations. As the grantor of a trust, you have ways to facilitate the transfer of assets to family members while retaining some control over the process and use of the assets. For example:


A trust for the benefit of the spouse that qualifies for the estate tax marital deduction. This type of trust allows the provision of lifetime income for a spouse without the grantor losing control of the ultimate distribution of trust assets to the beneficiaries. This trust is commonly used in the case where the grantor is in a second or third marriage and desires to provide for the current spouse but wants to eventually leave the assets to the children of a prior marriage.


A sophisticated gifting strategy employed by wealthy individuals, this irrevocable trust “freezes” the value of assets transferred to the trust for tax purposes at the time the trust is established. Grantors retain an interest in the assets transferred to the trust, while the “gift” is the remainder interest in the trust assets (the “remainder interest” is equal to the growth in the value of the assets held in trust during the term of the GRAT that exceeds the IRS-assumed rate of return for assets held in a GRAT). The entire original principal of the GRAT, together with the IRS assumed rate of return, is distributed to the grantor as the annuity.


As one of the largest components of an estate, a home may be an estate-tax liability all by itself. A QPRT may allow an individual to remove the home’s value from his or her estate while maintaining the right to live in the home for a number of years before ownership is transferred to the trust beneficiaries.

Jeffrey S. Gerson and Shawn P. Landau are Financial Advisors with the Wealth Management division of
Morgan Stanley in New York City. The views expressed herein are those of the authors and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, Member, SIPC ( Morgan Stanley Financial Advisors engaged Worth to feature this article. Gerson and Landau may only transact business in states where they are registered or excluded or exempted from registration, ( Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Gerson and Landau are not registered or excluded or exempt from registration. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the US. CRC1411018 03/16.

This article was originally published in the April/May 2016 issue of Worth.

Trust & Estate Planning

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