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This week’s column is provided by American Express Financial Advisors

How a trust fund can help build good values as well as financial security

For generations, people have been using living trusts as estate planning tools. Properly crafted, a trust can help provide the peace of mind that comes with knowing your assets will benefit your family according to your wishes.

Though they are sometimes regarded as complex, trusts can be quite simple. But it’s important to build in provisions that encourage the trust’s beneficiary to practice careful money management. You should work with a knowledgeable attorney and financial advisor to set up such a trust.

How a living trust works
A living trust is like a safe deposit box that contains your assets – including investment securities, real estate and other valuables. With a living trust, you retain control of the contents as long as you live. You can name yourself as trustee, or arrange to have someone else serve, and you can revoke the trust or change its terms whenever you wish.

At your death, the trust becomes irrevocable to ensure that your loved ones receive assets according to your wishes.

A trust may also enable you to bypass probate court proceedings, and reduce or eliminate estate taxes.

Arrange to distribute your assets – but attach some strings
Perhaps the idea of a trust appeals to you, but you are concerned that your beneficiaries are too young or irresponsible to manage their share of your trust assets. On the positive side, there’s character-building value in having them meet certain conditions before receiving their inheritances. Here are some options to consider:

• A legacy of family values: Do you feel strongly about your children or grandchildren graduating from college? If so, you could provide incentive by insisting they finish their studies and earn a college diploma before they can begin receiving a monthly payment from the trust.
  
  
• Flexibility is key: Beware of placing blanket conditions on trust funds. Since every child is different, keep definitions of success as broad as possible. Appointing a close personal friend or business associate as trustee or co-trustee, and/or successor trustee may help to add a personal touch to the trust requirements – and encourage fair treatment for each beneficiary.
  
  
• Allow for emergency needs: If incentive targets aren’t met, prudent trustors often allow the trust to distribute payments only in dire situations – such as the illness or disability of the beneficiary. Sometimes trust payments can be made directly by the trustee to the family of an unemployed beneficiary. Trusts can also be set up to allow emergency-only provisions for children, while providing broadly for grandchildren.

American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer.

August 17, 2000

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