When a Living Trust is Your Friend

When a Living Trust is Your Friend

Frank Sinatra – a singer
Michael Crichton – a writer
Steve Jobs – a tech pioneer
Robin Williams – a comedian
Dwight D. Eisenhower – The President of the United States

These may all be men you’ve heard a lot about, given their extraordinary success in their respective fields. However, you may realize that they also shared a common desire for the benefits that trust services can provide. Yes, all five utilized a living trust in their estate planning.

The vast majority of trust services are not employed by the rich and famous, but that doesn’t mean the rich and famous can’t also benefit through the use of trust services.

A recent celebrity to join their ranks, is the late, great Matthew Perry. Matthew Perry is known for bringing laughter and approachability to a broad audience in many of his film and television roles, and is perhaps most remembered for his role in the TV show Friends. He reportedly earned close to $1 million per episode nearing the end of the show’s run, and his estimated wealth when he passed was $120 million.

According to estate planner Tereina Stidd, blogging for the American Academy of Estate Planning Attorneys, Perry did not have a will—at least, none has been produced in the three months since his death. But he had done some estate planning in the form of a trust.

How could a living trust have been a friend to Matthew Perry?

When possible – it keeps his secrets. Because of the use of the trust in his estate planning rather than a will, the rest of the world does not know the terms of the trust. We do not know who the beneficiaries are. We do not know if there were charitable dispositions included to reduce the potential ~$40 million in estate taxes that might have been owed. We may never know unless there is a legal contest, which had not arisen as of this writing.

It will change when requested. When the living trust is drafted, instructions are given in an attorney-drawn trust agreement. Under the terms of that agreement, the grantor of the trust retains the right to cancel the trust or change the trust instructions. Nothing’s tied up. If Matthew suddenly wants more control, or to become more hands off regarding investment management, he is able to adjust that right away.

It does favors for the grantor. While trusts are mostly thought of as a tool for estate planning, they can be a great way to increase the amount of time one has by offloading other financial chores. Even paying household bills, or preparing income taxes can be included. It could also provide incentives for beneficiaries to reflect the desires of the creator, such as a wedding gift or reward for staying sober. This can be especially helpful for widows, or those with special needs.

 It steps in to help in the case of incapacity. Although it’s impossible to escape the risk of debilitating illness, having someone familiar with your finances that can step up to keep taking care of everything while you recover can be a big deal.

It puts Matthew’s needs first. Trustees are held to a fiduciary duty, the highest standard of care, so the trust officers executing the trust legally must put the needs of the client first.

However, as we learned in the TV show Friends, there may be some downsides in every friendship too. When it comes to a living trust, there are costs to consider both in terms of the initial drafting and reoccurring administration costs. There also may be some inconvenience in terms of having a separate legal entity to own and manage assets, but that’s also required to create some of the benefits.

Garden State Trust Company is proud of the work we do for our clients, and hope they don’t hesitate to call on us when a need arises.