A Sleeping Trust Solution

Posted by Ned Armand, President of Eastern Point Trust Company on May 14, 2015

Sleeping trusts are a valuable asset to parents who are beginning to plan for their family's future.

Key Takeaways 

  • Sleeping Trusts do not need to be funded immediately with cash.
  • Sleeping Trusts can increase the value of your existing life insurance policy.
  • Sleeping Trusts ensure that your assets are being used well.

 

Sleeping Trusts FAQs

What Is A Sleeping Trust?

Sleeping trusts, often used by young families, are trusts that have been established with all of the terms, conditions and distribution elections established; however the bulk of the funding commonly comes at a later date – usually from the estate and life insurance. You can establish a sleeping trust with Kiss Trust.
 

Why Not Have The Trust Created After You Pass Away?

The trust creation process can be complicated. In fact, the process can take months. If you wait until you have passed, your final wishes may be lost to interpretation – or worse, it could leave the door open for fraud or abuse. You will want to take your time creating the trust guidelines, and will want to carefully review the terms of the trust, personally.
 

How Can Sleeping Trusts Improve My Life Insurance?

Every year, nearly 1% of all Americans will die of unnatural causes. Only 62% of Americans have life insurance, though it is said that about 85% need it. This means that nearly a half a million Americans will die this year with insufficient funds left for their family. For the over 1.9 million who will die with some life insurance, the question becomes how prudently will the life insurance being left to your family be used and invested? Life insurance distributions are typically made as a lump sum, and if the beneficiary is under 18, the assets may lay dormant in an account that the insurance company holds. The assets aren’t invested and lose value due to the cost of inflation. All in all, it’s a bad strategy that can solely be rectified with a little preplanning. 

 

What are some of the benefits of sleeping trusts?

  • Sleeping trusts, above all, give the grantor peace of mind.
  • There is direct control over assets, even after your death.
  • A trust document in place prior to your death ensures the greatest value of your assets.
  • Terms of the trust are predetermined, instead of being up for interpretation.
  • The trustee you selected guides your trust before, and after, your death.

 

Sleeping Trusts are the Solution   

A “sleeping trust” is a simple way to ensure that the assets you leave for your family’s needs are being invested sensibly and being spent prudently. Creating such a trust can take as little time as a half an hour, and is as affordable as a dinner out with the family. Simply, you elect to fund the trust with a small initial contribution and then tie your life insurance policy, 401k and other assets to fund the trust after your death. Rest assured, the assets will only be used for the purposes you intended and by whom you intended. No ex-spouse or other party will have access to those funds for their own desires. Personally plan and prepare your family.  You know their needs better than anyone else, so why let someone else oversee the creation of a trust for your family?
Try Out a Sleeping Trust Today
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Tags: Estate Planning, Irrevocable Trust, Trustee, Sleeping Trust, life insurance

The Solution to Affluenza: Quiet Trusts

Posted by Ned Armand, President of Eastern Point Trust Company on May 1, 2015

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Quiet Trusts are used for many different purposes, since they have many different benefits, such as being the cure to "affluenza."

Key Takeaways

  • "Affluenza" is known in the estate planning world as a symptom of large, unstipulated inheritances, in which the beneficiary is careless with their life choices due to the inheritance. This is also known as "Sudden Wealth Syndrom."
  • It can keep the size of the inheritance from the beneficiary, or beneficiaries, until the distribution date, or other specified dates written within the terms of the trust.
  • Quiet Trusts aren't always needed if proper planning, education, and your financial savvyness has been bestowed upon the beneficiary, but they are a viable resource for grantors who have inheritance inhibitions.

 

What is a Quiet Trust?

It can be any trust type in which the beneficiary is not informed of its existence until distributions are to be made. The use of quiet trusts has many benefits but primarily they are used to prevent the beneficiary’s knowledge of the trust from creating an obstacle to professional and personal development. These are very similar to sleeping trusts, but add an extra layer of protection against reckless beneficiaries until a safe date.

In many instances, when heirs of an estate are knowledgeable of their inheritance, they may feel that they don’t need to push themselves to excel in their career or simply choose not to pursue a career path.  This is often referred to as “Affluenza” or “Sudden Wealth Syndrome.”

Motivation, routine, and a self-identifying career can be keystone to a person’s self-esteem, self-worth, self-confidence, personal identity and overall happiness.

Carnagie's Philosphy on Estate Inheritances

This is nothing new, Andrew Carnegie, the 19th-century steel magnate stated, “The parent who leaves his son enormous wealth generally deadens the talents and energies of the son, and tempts him to lead a less worthy life.” Or as many say today, “Shirt sleeves to shirt sleeves in three generations.”

Quiet Trusts in Today's World

This type of trust can mitigate these concerns when passing down wealth by simply preventing the beneficiary’s knowledge of the assets until their core professional and personal habits have matured. With the rise in wealth transfer due to the aging Baby Boomer generation this strategy has been rapidly growing in popularity.

Create Your Quiet Trust Today

           

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Tags: Estate Planning, Sleeping Trust, Quiet Trust

Why Name a Sleeping Trust as Beneficiary of Life Insurance Proceeds?

Posted by Ned Armand, President of Eastern Point Trust Company on Nov 10, 2014

Once an individual arranges for a life insurance policy, the tendency is to set it and forget it, but why?

Over the course of their lives, many people pay in thousands of dollars to insure that when they die there will be assets readily available to provide for their loved ones.

The Age Old Problem

What often isn’t considered is how the proceeds obtained from the death of the insured will be used. In addition, how can the insured also be assured the beneficiary Sleeping Trust, Life Insurance, Beneficiary, Kiss Trustof their life insurances policy will use the assets for the originally intended purposes?

Often life throws curve balls and the insured meets an untimely death, resulting in proceeds being distributed while the beneficiary is still a minor. This will result in the insurance company not paying out the proceeds until the beneficiary has reached age 18. This usually results in the proceeds being frozen in an account created by the insurance company until the beneficiary has come of age, which could in some cases withhold assets for over a decade.

In other less-than-desired circumstances a mentally or physically incapacitated beneficiary could receive the payout and be left vulnerable with a large sum of money and little or no knowledge of how to manage it. Life insurance payouts are usually the largest liquidity event of a person’s life, and the likelihood of financial management mistakes are extremely high resulting in even bigger consequences if the assets are managed poorly.

The Irrevocable Solution

Creating an irrevocable "Sleeping Trust" and naming it as the beneficiary of the insurance policy solves all the aforementioned problems and then some. Listed below are the top six reasons why:

  1. The money allocated from death proceeds will only be available per the terms of the trust. This can help ensure that a lump-sum inheritance is not quickly depleted.

  2. An irrevocable trust with proper spendthrift provisions protects the proceeds from being taken by creditors of the beneficiary or reducing government benefits being received by the beneficiary.

  3. Prevents family and third parties from tampering with the insured’s intentions for the proceeds.

  4. A Sleeping Trust can be easily created beforehand and cost effectively maintained until the time of death, after which the death proceeds pour into the irrevocable trust which then “wakes up” and administers the assets.

  5. Allows minors access to assets that would otherwise be withheld.

  6. Creating a distribution schedule in lieu of unfettered lump-sum access helps recipients prioritize needs over wants.


Have Your Cake and Eat it, Too

Creating an irrevocable Sleeping Trust for life insurance proceeds is an easy and cost-effective solution to ensure those life insurance proceeds are spent as intended, and now there are tools available online to help do just that.

Download Your FREE Sleeping Trust For Life Insurance Proceeds Checklist!

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Tags: Life Insurance Trust, Sleeping Trust

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