Trust And Fidelity: Exploring Fidelity Investments' Unique Offerings

A trust is a legal arrangement for the transfer of property by a grantor to a trustee for the benefit of a beneficiary. Trusts are traditionally used for minimising estate taxes and can offer other benefits as part of a well-crafted estate plan. Trusts can also be used to protect your legacy and provide you with greater control over how your wealth is distributed. Fidelity offers a range of trust solutions designed to support your inheritance and estate planning strategies.

Control of wealth

Trusts are a way to maintain control over your wealth and assets, even after your death. A trust allows you to specify exactly how and when your wealth is distributed to your beneficiaries. For example, you can set up a revocable trust so that you retain access to the assets during your lifetime, but also designate to whom any remaining assets will be distributed after your death. This can be particularly useful in complex family situations, such as when there are children from multiple marriages.

Trusts also allow you to maintain control by protecting your legacy and wealth from irresponsible beneficiaries or from creditors. They can also help you avoid probate, a public process that can be costly, time-consuming, and may expose your family's wealth to scrutiny. Trusts are also private, so the disposition of your estate remains confidential.

In addition to control, privacy, and probate savings, trusts offer other benefits, such as tax advantages and charitable giving.

Protection of legacy

Trusts are a great way to protect your legacy and ensure that your wealth is distributed as per your wishes. A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be set up in many ways and can specify exactly how and when the assets are passed on to the beneficiaries.

A trust can help protect your legacy in several ways. Firstly, it can shield your estate from your heirs' creditors. Secondly, it can prevent irresponsible beneficiaries from squandering their inheritance through unwise financial decisions. Thirdly, it can ensure that your beneficiaries gain access to your assets quickly by avoiding probate, a lengthy legal process for executing your will that can delay the distribution of assets. Furthermore, a trust can also maintain the privacy of your beneficiaries and the disposition of your estate, as probate is a matter of public record.

Fidelity offers a range of trust solutions to support your inheritance and estate-planning strategies. Their services include trust administration, record-keeping, tax return preparation, and customised investment management of trust assets.

Privacy and probate savings

A trust is a legal arrangement for the transfer of property by a grantor to a trustee for the benefit of a beneficiary or beneficiaries. The grantor places assets into the trust, which takes ownership of them. The trustee then administers the trust under the terms of the trust documents. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.

There are two main types of trusts: revocable and irrevocable. A revocable trust, also known as a living trust, can be altered or revoked by the grantor at any time during their lifetime. The grantor retains control of the property, and the assets will be included in the grantor's gross estate at their death, subject to estate taxes. For income tax purposes, the trust is treated as non-existent, and all income and deductions appear on the grantor's personal income tax return.

On the other hand, an irrevocable trust generally cannot be changed without the permission of the beneficiary. The grantor permanently relinquishes control of the assets placed in the trust, and the trust is designed as a separate tax entity. The trustee is responsible for filing the trust's annual income tax return (IRS Form 1041).

When deciding between a revocable and irrevocable trust, it is important to consider your specific circumstances and goals. A revocable trust provides more flexibility, as you can change or terminate the arrangement at any time. However, an irrevocable trust may be preferable if your primary goal is to reduce the amount of your estate subject to taxes, as the assets are transferred out of your estate and are no longer under your control.

Management and record-keeping

Trusts are a legal arrangement for the transfer of property by a grantor to a trustee for the benefit of a beneficiary. The trustee assumes the responsibilities related to managing property and investments held in a trust, along with record-keeping tasks and the periodic filing of income tax returns.

Fidelity offers a range of trust solutions designed to support inheritance and estate planning strategies. These include:

• Trust administration
• Record-keeping and custody
• Coordination and communication with beneficiaries
• Principal and interest accounting
• Tax return preparation
• Managing distributions to beneficiaries
• Customized investment management of trust assets

Fidelity's Trustee Services can bring objectivity, continuity, and experience to the management of your trust. With Fidelity as the corporate trustee, you may have more time to build a better relationship with your client. A dedicated trust officer is assigned to oversee the fiduciary responsibility of the trust and provide administration as directed by the trust agreement.

Fidelity also offers an Administrative Trustee Service, where they are appointed to be the corporate trustee. This can help to manage the challenges of trust administration and client relationships.

When considering a trust, it is important to review your estate planning needs and existing plans regularly, especially after major life events such as marriage, the birth of a child, divorce, inheritance, or death. It is recommended to work with a tax advisor and an estate planning attorney to determine the most suitable type of trust for your circumstances.

Tax efficiency

Trusts are often used for tax efficiency, particularly to minimise estate taxes. They can also help to reduce or eliminate costs related to wealth transfer, such as probate fees and gift taxes.

From a tax perspective, trust assets are generally classified as either "principal" or "income". The assets the trust owns represent its principal (e.g. stocks, bonds, or real estate), and what those assets earn or produce represent its income (e.g. dividends, interest, or rent).

For income tax purposes, a trust is treated as either a grantor or a non-grantor trust. In the case of a grantor trust, the grantor is responsible for paying the tax on income generated by trust assets. In the case of a non-grantor trust, the responsibility for paying the income tax depends on whether the trust is considered simple or complex. A simple trust requires mandatory distributions of all income during the taxable year, prohibits distributions of principal, and prohibits distributions to charity. In a complex trust, the trustee has more discretion relating to the distributions of income and principal.

Structuring trusts so they distribute income to beneficiaries may be an effective way to help reduce income taxes. This is because the trust will take a deduction for the distribution, and, given the higher thresholds for individual filers, the beneficiary may be in a lower tax bracket.

It's important to note that the taxation of trusts can be complex and depends on several factors, including the type of trust, the distribution of income and principal to beneficiaries, and state tax laws. Working with a tax advisor and an estate planning attorney can help individuals determine the most appropriate type of trust for their specific circumstances and goals.

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