What Matters Most – The Importance of a Trust with Jen Jones

In today's episode, we begin a 3 part series with Jen Jones, Senior Wealth Advisor with First United's Wealth Management department. The topic today is about the importance of a Trust. What is a Trust and why might you need one?


Announcer: Welcome to the “What Matters Most” podcast, presented by First United Bank & Trust. That’s my bank. Visit us today at mybank.com.

Eric: Hello and welcome to “What Matters Most,” a podcast all about finances, community, savings, and security for you, your family, and your business. This podcast is brought to you by the helpful folks at my bank, First United Bank & Trust. I’m your host, Eric Nutter, and in today’s episode, “What Matters Most,” is the importance of a trust. And for this discussion, I am thankful to be joined again remotely today by Jen Jones, senior wealth advisor in First United’s Wealth Management department.

Good morning, Jen. How’s it going?

Jen: Hi, Eric. Good, how are you?

Eric: I’m doing well. I appreciate you joining me today. We’re kicking off a three-part series with you this month to talk about a few different topics. You joined us recently for a beginning-of-the-year thing, and we talked about the resolutions for the beginning of the year and all the financial tips and tricks that you could give us.

But today, we’re going to dive into a deeper topic about the importance of a trust. So when we do that, let’s start at a real base level. What is a trust?

Jen: Yes, that’s a great question. What is a trust? We are going to get a little deeper here today, but a trust is a legal document that lists a trustee to oversee how assets will be distributed to beneficiaries. One of those beneficiaries are people or places, non-profit organizations, charities, things like that. It’s just really a document that has the rules of how that money will be distributed. And sometimes, those documents are used whether it be for a tax situation, where it makes sense for someone’s tax structure that they have a trust. Sometimes, it’s because they may have a family or others, that their beneficiaries that they’re giving money to that aren’t the greatest with their expenses and finances and so they need someone else to oversee that.

Eric: [inaudible 00:02:23]. Put some guard rails.

Jen: Yeah. Just making sure that they’re spending within their limit, so to speak. And then maybe it’s a special needs situation. We have clients where there’s money allocated to them but for, you know, their medical benefits or things, we want to make sure that we don’t lose any of those. And so there’s ways that we can help save money for them in a trust and create a document that way.

So we’re gonna go through just a couple of the important, like I said, kind of go through that a little bit more. And then the big issue and kind of the hot topic with this is, you know, there’s some changes that are going on, potentially, right now, within the court or within the… Excuse me, [inaudible 00:03:18] something. And we just have to make sure that everybody’s aware with them.

So again, just to kind of go through some reasons that we would have the trust document in place is, again, we said to reduce taxes, and it gives money directly to the beneficiary, and they don’t have to go through an estate process.

Eric: It’s typically part of a will or, you know, someone passes and they’re…

Jen: Usually, yes. But you can also use it within their lifespan as well too. So it could be for both. A lot of times, it is for when someone’s passed away.

Like I said, it could not only protect spend drift or, you know, how people stay within the guard rails, as you said, of kind of spending, but also help protect minor children and the interest of minor children. And even keep assets within the family. Sometimes folks are worried that maybe money that has been in the family for years and years and passed down through generations, if somebody marries somebody that they don’t like, and they want to make sure that they don’t get any of those funds too, a trust can help with that, in how that money is distributed.

Eric: Is it always money or is it assets as well, like physical things?

Jen: No, it doesn’t have to be. Yeah, it can real estate. It can be physical things, not only property or land. It can be jewelry. Yeah, it can be a lot of stuff. So yeah, you can really kind of put anything in there, [inaudible 00:05:00] that almost that you can think of.

And then, also, like I said, not only to protect the money, how you want it to flow if you’re not here anymore, but even while you’re still alive, it helps kind of protect the flow of assets and can even act as a credit shelter, in some cases, with tax structure and things like that. So definitely something you want to talk with your tax advisor about, if that’s what you were thinking, hmm, that sounds helpful to me.

The biggest issue we’ve seen is that with estates, there is exemption amounts right now. So there’s a federal exemption and then there’s an exemption for each state that you live in. And the exemption really means that you don’t have to pay additional taxes on the money if, in the state, it is over a certain amount of money. And if it is under those amounts, you don’t have to pay that. Some of the states have the same as the federal, and some of them are different.

For example, in the state of Maryland where a lot of our clients reside, it’s a $5-million cutoff right now. But for the federal exemption, it’s over $11 million. So there is a difference there, but at least, you wouldn’t be paying…you’re not paying as much taxes. The federal, like I said, it’s $11 million. But the legislation that’s currently in effect is looking to cut that down to $5 million. And for Maryland too, they’re actually looking to cut it down to around a million dollars.

So what does that exactly mean? Well, that means that a lot more people that weren’t affected by these estate taxes and things may need to do some additional planning, and that’s really kind of what we’re getting at today is what the real importance of a trust is. Maybe that’s the document that you didn’t think you needed in the past and kind of didn’t apply to you, but, Eric, if you look at a million dollars and you think, well, that’s a lot of money, and you start adding up, it’s like you said, it’s more than just cash.

Eric: You start adding up your real estate.

Jen: You start adding up your property.

Eric: All your stuff, it can get up to a million pretty quick.

Jen: Right. And so that’s really what we’re kind of, you know, really stressing the importance on today is that you may have not worried about that in the past, but, as noted, and of course, this is still proposed legislation, so it’s nothing that’s gone through, but what we’d like to do is just make our [inaudible 00:07:53] and our clients aware that this could be a possibility and it’s something that you definitely want to think about in the future, and make sure that if you do see that these kind of rules involves change, that you definitely need to take action and keep yourself safe and plan that out a little bit more.

Eric: Right. Because if you’ve based your decisions up until now on knowing that the cutoff is much higher than the amount of money you have or the amount of assets you are including in your trust that you would need to re-look at that. Just take a look because you may be expecting a tax benefit and not get it. Is that basically the idea?

Jen: That’s right, yeah. It may end up having to pay out more taxes than you were thinking that you needed to, and then not as much of the assets that you have are going to flow where you wanted them to go.

Kind of a two-parter today in that let’s talk about what a trust is and maybe you need the trust and some of those kind of bullet points that I mentioned. But then also, if you have a trust or you think you didn’t need something like that in that past, maybe with some of these proposed legislation, it may be something that you want to look at, or it may be something that you have looked at, and you need to make sure that you keep track of that and keep things updated as needed.

Eric: Right. So that million-dollar point, and obviously, that a questionable item. It may stay where it is, it might be cut down to a million, who knows what’s going to happen with it. But outside of that, we set that aside for second, is there an amount of money… When we talk big numbers like that, some of our listeners may be thinking like, well, I have to have that much to even consider having a trust. Is that necessarily the case? I mean, is there a reason why a person would just avoid setting this up if they don’t have as much? Maybe they only have $250,000 in assets, is that still…?

Jen: It definitely goes off of the reason of why you need to set that up. You know, as I kind of talked in the beginning, another great example is we talked about this special needs trust, and that’s really for folks that do have special needs, and a lot of times, they have some pretty hardcore medical benefits that go along with their care. And setting up a special needs really kind of helps to make sure that you’re not interrupting any of these medical benefits, that you can still save money for the benefit of them. Because one of the things is, a lot of times, is they’re not allowed a certain amount of money in their name, with the medical benefits and things that they are provided. So a special needs trust works around that. And a lot of times, there aren’t huge amounts of money on things like that, but you know, certainly a decent amount on things that are needed for that individual, and definitely things that we keep on the books and we’re happy to help and administer all that as well.

No, it doesn’t necessarily need to a dollar amount, but it’s more of the need. And that’s something that, you know, if you’re not sure of, we’re definitely willing to sit down with you here at First United and kind of walk you through that process and see what would be the best-case scenario for you.

Eric: You know, I think that’s probably what the position…the majority of people probably in, like I don’t even know whether I need a thing or not or am I in a situation where I should be concerned and I should be setting those things up and so, you know, I think in past episodes, where you and I have spoken and we’ve talked about the importance of an advisor, I think that’s where that comes into play so that’s more to sit down with someone, like yourself, and say, “Here’s all my stuff. Help me figure out what I need to do,” and your role is to advice whether or not I should have a trust or how it should be set up and the rues around it and that sort of thing.

Jen: Yeah. And we’re happy to do that. So yes, absolutely.

Eric: Excellent. All right, any final thoughts about the importance of a trust that you’d like to share with our listeners?

Jen: No, I would say that, you know, if you’re unsure, you know, maybe you think, oh, maybe that’s not…it’s important to me but maybe not important enough, just give us a call anyway. It never hurts to have a conversation. And we’ll definitely let you know what the best avenue is for you to take.

Eric: Excellent. All right, Jen, thank you so much for joining me and providing this information about trust to our listeners. If anyone has questions or wants to learn more, what’s the best way they can get the support that they need?

Jen: Well, you can email me directly at jjones@mybank.com. Or you go to our website at mybank.com and click om the Wealth tab, and you can learn all kind of information about all of our advisors and their contact information in specific areas. Or there’s tons of articles and things in there too, so you [inaudible 00:13:27].

Eric: Awesome. Well, that brings us to the end of our show. You can always find more episodes by visiting mybank.com/podcast, or on your favorite podcast app. You can also leave feedback, ask questions, or request a topic for us to discuss by sending an email to podcast@mybank.com.

Thanks again for listening. We’ll be back next week with more helpful content. But until then, we wish you the best in focusing on what matters most to you.

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