When you explore trust planning, you’re taking a critical step in securing your family’s long-term financial security. Regardless of your family’s net worth, a trust will enable you to better control and protect your assets. “Trusts are vital to helping support people throughout their lifetimes and to put plans in place for the next generation,” says Nancy Hermann, Senior Vice President and Regional Trust Manager with U.S. Bank.
Of course, trust planning involves much more than numbers on a spreadsheet — it also involves family dynamics. “Money can be emotional, and families can be sensitive,” explains Hermann. “When you combine money and family, things can veer off track.” Preparing for the emotional aspect of trust planning will make the entire process easier for everyone.
Here are four important elements to consider when planning a trust:
1. Lay the groundwork early
As a parent, you can start communicating your financial values to your children early on. “When parents frequently share their philosophy about money with their kids, they lay an important foundation,” Hermann says. “That makes the family better equipped for estate planning discussions later.”
You can start with your children at a young age by communicating the value of saving and financial planning. Teaching your children that financial security takes planning and care will help them understand your choices and set them up for success in their own lives. It will also establish a basis for open and honest conversation around finances. If money talk hasn’t been common in your family up until this point, fear not. Just make it a priority to start these conversations as soon as you can.
2. Approach the topic with respect and care
When initiating a conversation about trust planning, it’s important to be candid and considerate. Financial discussions can sometimes make people uncomfortable, confused or concerned, so try not to catch anyone off guard. If parents are broaching the subject with their adult children, they can say, “It’s important that we talk as a family about the future. We want to make sure we’re able to take care of ourselves financially as we get older, and that means it’s time for us to share our hopes and expectations with you.” Plan a time to sit down and talk so that the discussion isn’t a part of other conversations that could be more emotional or about other subjects.
Conversely, adult children might be the ones to initiate trust-planning conversations with their aging parents, often spurred by a catalyst such as a health scare or upcoming surgery. When this happens, Hermann suggests starting the discussion along these lines: “Mom and Dad, your health and happiness are important to us. We want to make sure there are resources in place to support you in the years ahead. Let’s work together to avoid getting caught up in a scenario where we need to help you navigate medical issues but aren’t able to work on your behalf.”
3. Tap in to third-party estate plan help
Even in the most highly functioning families, discussions about financial matters can get difficult at times. There may be disputes between siblings or misunderstandings that arise when people are left in the dark. The best way to mitigate any feelings of discomfort is to involve a third party to facilitate honest discussions and “help take the emotion out of it,” Hermann says. “Without that refereeing, emotions can take over. We make sure meetings focus on the right things; that’s how they’re most productive.”
Not sure where to turn? Your bank can help. “It’s smart to have a relationship with your bank and let it evolve over time,” Hermann advises. “Maybe initially your bank is managing the money but doesn’t have a trustee-type relationship. As you age and start thinking about your estate plan, the bank can get more involved.”
If you don’t already have a relationship with your bank, that’s okay. Simply reach out to a personal banker and request a referral to help with estate planning.
A financial professional can guide you and your family through the entire trust-planning process. While you’ll need to select an estate planning attorney to draft the actual legal documents, a financial professional can help you prepare for that meeting and help you understand what to expect. They can also coordinate family meetings and reach out to individual family members along the way if that’s something you think might be helpful. “We can collaborate with multiple generations of the family to make sure things are structured well,” Hermann says. “People don’t know what they don’t know. The bank can bring an educated perspective to the whole family and provide them with options.”
Your financial professional can help you balance both family members and other professionals — including your estate planning attorney and tax advisor — to make sure the entire team is working together on your behalf. “When you involve professionals in the process, you essentially create a road map for everyone involved,” Hermann says.
4. Remember the end game
Successfully navigating family dynamics and establishing your trust plan is an important financial accomplishment. While the process may seem daunting at times, keep moving forward. Rely on your professional team of experts to coach your family through the process and try to view the experience as a way to draw your family even closer together.
The bottom line, says Hermann, is for families to stick with it. “It’s worth the minimal investment of time to establish your trust plan,” she says. “The result is being able to enjoy the immense peace of mind that comes with having a trust in place.”