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Retirement Plan

Three Suggestions

if You Inherit a Trust

by Richard (Rick) Childress, CIMA , CRPC .
®
®
First Vice President. PIM Portfolio Manager
®
avid “Chico” Esparza, senior Beneficiary or Beneficiaries: Is there a sole beneficiary or several
fiduciary strategist with Wells Fargo beneficiaries of the trust? How do the terms address the rights different
DWealth & Investment Management, beneficiaries have to distributions from the trust?
remembers meeting two clients, a brother Age Restrictions: Does the beneficiary have to reach a certain age
and sister whose parents had passed away. before accessing some or all of the trust?
“Unfortunately, their parents had not Distribution Restrictions: Can beneficiaries access the principal or
discussed their estate plans with the adult just the income from the trust? Does the beneficiary need to provide
children. When the siblings learned they the trustee with proof of the beneficiary’s own income and expenses to
were the beneficiaries of a sizable trust,” receive distributions? What categories of expenses can the trust cover
Esparza recalls, “they had no idea what to for the beneficiary? (Typically, trusts with discretionary provisions have
do next.” ascertainable standards that can cover health, education, maintenance,
The brother and sister had many and support.) Can distributions be adjusted for inflation?
questions. Who handles the estate? What Lifetime of the Trust: Does the trust terminate once the beneficiary
are the terms of the trust? And what should reaches a certain age, or is it meant to last the beneficiary’s lifetime? Is
their next steps be? “The bank was appointed any portion of the trust designated for future generations?
as successor trustee, so we explained the “Trusts present an opportunity to preserve, accumulate, and
timeline and process for settling the trust estate,” Esparza says. “It transition generational wealth,” Esparza says. “For that reason, the
helped to ease their minds to know that professionals would be handling trustee should be prudent and equitable in administrating the trust,
the numerous tasks required for an orderly estate settlement.” giving consideration to the current needs of the beneficiary as well as
As Esparza’s clients found, stepping into the role of beneficiary can the long-term goals and objectives of the trust.”
feel a bit like stepping into the unknown. Here, Esparza offers three 3. Ask Questions Before Taking Distributions.
suggestions for those in similar situations. “Before taking a trust distribution, some beneficiaries find it useful
1. Build an Advisory Team. to inquire about the potential tax consequences. That’s where a tax
A good first step for the beneficiary is to meet with the trustee who advisor should provide guidance,” Esparza says. “Beneficiaries also may
is tasked with executing the terms of the trust. It may be an individual, consider consulting with the trustee and the rest of their advisory team
such as a CPA or lawyer, family member, or potentially a corporate about additional considerations or impacts a trust distribution may have
trustee such as Wells Fargo Bank. on the investment plan.” In addition, beneficiaries should consult with
“There will be a lot of questions, so it’s important to establish a their own legal counsel if they have specific questions regarding their
communication plan and outline tasks that need to be accomplished rights with respect to a trust.
along with a general timeline for how long it will take to settle the Esparza shares the story of a young beneficiary who wanted to use
estate,” Esparza says. her trust fund to purchase a luxury car when she turned 16. “I posed
In some instances, once the estate is settled, a new trust is funded this question: ‘Would a less-expensive car meet your transportation
with the beneficiary’s share of the estate; in other cases, assets will be goals and help preserve trust assets for the long term?’” he says. “It is
distributed outright to the beneficiary. If the assets will be retained in important for beneficiaries to stay connected with the trustee and to
trust, the trustee collaborates with an investment advisor to help manage ask clarifying questions so they understand the goals and objectives
the assets according to the terms of the trust. established by the grantor.”
“The trustee and investment advisor will create a plan that is based on For more information email: RChildress@agagewealthpartners.com
the terms of the trust and considers the needs of the beneficiary,” Esparza
says. “A best practice is for beneficiaries to seek the guidance of a tax
advisor regarding tax implications related to trust distribution.”
2. Understand the Terms of the Trust.
One of the first questions a beneficiary might have is, “What
benefits do I have under the trust?” Beneficiaries are well served to seek Please scan the QR code
independent counsel for questions regarding interpretation of their to access our website.
interest under the trust.
Esparza explains that a trust can be a useful tool for holding,
managing, and distributing property as outlined by the trustor(s) — the
creator(s) of the trust — in the trust agreement, but each trust is unique
in how assets can be distributed to beneficiaries. Some common areas of
discussion include:
Wells Fargo Wealth & Investment Management (WIM) provides financial products and services through various bank and brokerage affiliates of Wells Fargo & Company. Trust Services are available through Wells Fargo Bank, N.A. and Wells Fargo Delaware
Trust Company, N.A. Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.Wells Fargo & Company and its affiliates do not provide tax or legal advice. This communication cannot
be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the
time your tax return is filed.This advertisement was written by Wells Fargo Advisors Financial Network and provided to you by Richard (Rick) Childress, CIMA®, CRPC®. First Vice President. PIM® Portfolio Manager.Investment products and services are
offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Agape Wealth Partners of Edwards Asset Management is a separate entity from WFAFN.
Three Suggestions
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