I'm in my 80s, why do I need a Trust?

Welcome to Lone Oak Trust Company’s third installment of exploring how Trusts can be used at different stages of life for different purposes. Our previous issues explored how Trusts can protect assets during the wealth building stage, and subsequently, the transfer of wealth to future generations. This edition will look at how Trusts can help establish a family legacy, both through charitable giving and in educating future generations on how to be good stewards of family wealth.

“I’m in my 80s, why do I need a Trust?”

As a multi-generational company, Lone Oak Trust Company facilitates wealth transfers following the guidelines set in place by wealth generators and their heirs. Today, the biggest generational wealth transfer in history is beginning to occur with approximately $30 trillion expected to pass from Baby Boomers to Generation X and Millennials. At its peak, that equates to 10% of the total wealth in America changing hands every five years. For those families at the precipice of this shift, being proactive and having a plan in place will shape how future generations will come to benefit from their predecessor’s wealth.

Educating heirs on financial responsibility is an incredibly important part of preserving family wealth. In our experience, one of the biggest challenges to inter-generational wealth is a loss of perspective. When wealth flows from G1 to G2 to G3, the third generation is far enough removed from the initial wealth creation that they feel “divorced” from the effort in creating and values surrounding preservation. Learning how to speak to family wealth can be difficult and Trust accounts can help facilitate those conversations.

Trust accounts are governed by a document that spells out exactly how the principal and income can be invested or spent. Families can use the Trust document as a guiding tool for  beneficiaries to become good stewards of the family’s wealth. Philanthropy is another way in which a rising generation can learn financial responsibility. Whether through a Charitable Trust or a Private Family Foundation, charitable giving is a great way to introduce, instill, and protect family values through multiple generations.

For all their effectiveness, the success of family wealth planning comes down to communication. No matter how prepared you are or how sophisticated your estate is, if you do not communicate with your heirs, there is no guarantee that the family wealth will last. As a Corporate Trustee, it is our duty to ensure that the grantor’s wishes are complied with, and we work diligently to understand their intent in leaving wealth to support others. A Corporate Trustee also provides objectivity, continuity, and professionalism to ease the burden of full fiduciary responsibility from family members. When setting up a Trust, it’s important to consider how money can change family relationships, as no one knows what the future holds and how subsequent generations may interact.

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