America’s Most Advisor-Friendly Trust Companies Showcase - Flipbook - Page 10
2026 AMERICA’S MOST ADVISOR-FRIENDLY TRUST COMPANIES
STRUCTURING TRUSTS FOR
MAXIMUM BENEFIT
Wealth managers should carefully
consider the type of trust that best
aligns with a client’s objectives.
Revocable living trusts allow
flexibility during the settlor’s lifetime but
do not provide asset protection or tax
benefits. Irrevocable trusts, on the other
hand, remove assets from the settlor’s
estate, potentially reducing estate taxes
and shielding wealth from creditors.
Testamentary trusts, created through
a will, become irrevocable upon the
settlor’s death and are commonly
used for structured inheritance
planning. Pourover trusts function as
a catch-all, receiving assets from an
estate upon death, ensuring smooth
administration.
Discretionary or “sprinkling” trusts
give trustees the authority to distribute
income based on beneficiaries’ needs,
preserving wealth while offering
flexibility. Foreign trusts, while more
complex, provide additional tax and
asset protection advantages in specific
circumstances.
Certain trusts, such as annuity or
unitrusts, allow a grantor to retain an
interest while simultaneously providing
financial benefits for another party.
This structure is commonly used for
charitable giving, ensuring tax efficiency
while fulfilling philanthropic goals.
Each trust structure has unique legal,
tax, and financial implications. Careful
planning is essential to maximize
benefits while avoiding potential pitfalls.
Tax treatment varies based on the type
of trust and how income is distributed.
Trusts, aside from grantor trusts,
are generally treated as separate
taxable entities, subject to their own
exemptions and tax brackets.
Designated
Beneficiaries
Charitable
Designations
Last Will and
Testament
Trust
Critical
Elements
of an Estate
Plan
Health Care
Proxy
When a trust mandates income
distributions, beneficiaries are taxed
on that income rather than the trust
itself. If the trust accumulates income,
it is subject to taxation at the trust
level, often at higher rates due to the
compressed tax brackets.
For grantor trusts, the settlor is taxed
on trust income as if they still owned
the assets. This structure can be
beneficial in certain estate planning
scenarios, particularly when a grantor
wants to pay income taxes on behalf of
beneficiaries, thereby preserving more
wealth within the trust.
Gift tax considerations also come into
play when assets are transferred into a
trust. Whether a gift is taxable depends
on the terms of the trust and whether
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Durable
Power of
Attorney
Health Care
Directive
the transfer qualifies for the annual gift
tax exclusion or other exemptions.
A well-structured trust includes several
critical elements. The settlor, or grantor,
is the individual who establishes the
trust and transfers assets into it.
The trustee, whether an individual or
corporate entity, is responsible for
managing trust assets and ensuring
compliance with the trust terms.
Successor trustees are often named to
provide continuity if the original trustee
is unable to serve.
Trust documents specify the assets
included in the trust, often referred
to as the corpus or principal. They
also outline the beneficiaries and
the conditions under which they
receive distributions. Some trusts
