November 27, 2017
Personal trusts, once the exclusive province of a small subset of the ultra-wealthy, have surged in popularity since the 1990s. It’s not surprising: The aging of America’s baby boomers has fueled an explosion in wealth transfer, with $30 trillion projected to be handed down to heirs over the next three decades1. Meanwhile, the liberalization of trust laws, most notably in Delaware, Nevada and South Dakota, has made trusts more versatile and more widely available to families with long-range legacy goals.
A key result of these shifts in the trust landscape has been a heightened emphasis on designing, structuring and administering trusts based on the types of assets they hold. “It’s an important consideration,” says Daniel Wani, Arizona and Nevada Market Leader for U.S. Bank Private Wealth Management. “Yet it is often overlooked by families and advisors.”
As Wani explains it, different assets have different administrative and maintenance needs. A stock-and-bond portfolio, for example, will be managed differently from an oil-and-gas lease, intellectual property or a family business. “Twenty years ago, certain considerations fell outside the purview of trust and estate advisors,” he says. “Assets were managed and maintained primarily at the entity level, regardless of whether or not they went into a trust.”
Giving asset types their due
Today, that approach could cost a family a significant opportunity to maximize the unique benefits of a trust. “The more weight we give to the specific asset type and its long-term goals, the more we’re able to tailor a trust vehicle to the family’s estate planning and legacy needs,” Wani says.
To be sure, the case for choosing a trust structure according to its constituent assets applies primarily to irrevocable trusts. “Most families are actually well-served by a revocable trust, which keeps their estate out of probate and enables them to fulfill a variety of long-range goals,” Wani says. “All of the family’s assets can be titled to a revocable trust — plus the grantor has complete freedom to change or even revoke the trust.”