A Legacy of Trust: Essential Family Conversations

Family trusts are created for a reason – use this opportunity to open up the lines of communication.

At their core, trusts are about the transfer of assets from one person – or, more often, one generation – to another. That’s why for a family trust to work eff ectively, all family members should understand the different aspects of a trust, including its purpose and the varying responsibilities of those involved. If your family has a trust, here are some important topics that should be discussed between the elder and younger generations.

Getting To Know the Trust

Why has a trust been established?

There are many reasons to create a trust, such as providing for future generations, facilitating the sale of a business, or protecting assets from creditors. The family should discuss the intent for the trust and if there’s a mission the younger generations can help advance.

What kind of trust is it?

Different trusts can achieve different goals. For example, someone looking to minimize gift taxes might choose a grantor retained annuity trust, while someone who is transferring real estate to their heirs might choose a qualified personal residence trust. As a family, it’s helpful to discuss the specific purpose the trust was created to serve.

How are the trust’s funds to be dispersed?

How money moves within and out of the trust is important. Was the trust created to provide regular income? Can distributions be made from the trust’s principal? What expenses can be paid for by the trust? Who is responsible for paying taxes on trust income?

Getting To Know the People

Who else is involved in the trust?

A trust will be overseen by a trustee, which can be either a person or a corporate entity like Baird Trust. Knowing who has control over the trust assets and how this trustee was selected is important, as that may affect relationships between the trustee and the beneficiaries.

Who advises on financial matters?

It may be helpful for the whole family to know the professionals involved in creating and maintaining the trust, like a family financial advisor, attorney, accountant or insurance specialist.

Getting To Know the Planning Decisions

Are there estate planning decisions elders want to talk through with their heirs?

Maybe this conversation can lead to others, such as choosing a power of attorney or addressing life insurance options.

Do older family members want help cataloging their assets and going through documents?

Especially for those who are older, keeping track of the trust’s assets and managing the paperwork can be daunting. Initiating conversations with young adult family members about the trust may usher in more beneficial management of the family’s assets.

Having family-wide discussions regarding the structure and implicati ons of your trust can foster understanding and open dialogue about the family’s overall financial health. For younger family members, engaging with your parents and grandparents about the workings of the trust and their own financial decisions can lead to broader conversations about their personal financial well-being, from credit card usage to long-term care plans and philanthropic intentions. While there might be some initial awkwardness, this conversation could provide an opportunity to make decisions as a family that bring you closer together.

Baird Trust Company (“Baird Trust”), a Kentucky state chartered trust company, is owned by Baird Financial Corporation (“BFC”). It is affiliated with Robert W. Baird & Co. Incorporated (“Baird”), (an SEC-registered broker-dealer and investment advisor), and other operating businesses owned by BFC. Neither Baird nor Baird Trust provide individualized tax, accounting or legal advice. Please consult your accountant or attorney for personal tax, accounting or legal advice.