Thanks for coming back for another edition of Planning for your Purpose; Telos Financial’s blog where I discuss different topics related to financial planning. Dennis LaVoy, CFP®, CLU® is Metro Detroit’s CERTIFIED FINANCIAL PLANNER™ Professional serving clients throughout southeast Michigan as well as across the country.

The purpose of the blog is to introduce financial planning concepts and questions I receive from clients that I believe are important. I want to start discussions about topics that will educate, benefit, and help improve your financial life. Ultimately, to help you focus on your telos!

This week, I’m glad to welcome a guest blogger, Sarah Prosser. Sarah is an attorney with the Mitzel Law Group PLC serving clients in the Ann Arbor community and greater Detroit Metro.  She is also licensed to practice law in Florida.

Sarah focuses her practice in the areas of estate planning and business law and I met Sarah shortly after opening my firm. We connected because we are both passionate about serving our peers and to our mutual recognition that they are underserved and undereducated about the need for estate and financial planning.

Here’s Sarah, highlighting some of the perks of trusts for young professions:

“I’m not wealthy enough to have a trust.”

The most common misconception about trusts is that they are only for the wealthy.  This is due in large part to the portrayal of trust-fund babies in popular culture (think Gossip Girl).  However, more often than not, I recommend that clients use a revocable trust to help achieve their estate planning goals.

Before diving into the detailed benefits of trusts, it’s important to establish a basic understanding of trusts.  A trust is a legal entity (like a corporation) set up by you as the “grantor”.  A trust exists until it’s terminated.  This means that your trust continues to exist after your death.  The main function of trust (like a will) is to name beneficiaries for your property.  A trust is a little different from a will in that not only do you describe the property and list who should receive it, but you must also “fund” (or transfer) the property into the trust.  Even though your property is technically owned by your trust, your day-to-day life will function exactly the same.  The trust can be changed or revoked during your lifetime.

Now that we have a better understanding of trusts, let’s talk about why trusts are beneficial.

Probate Avoidance– Property left through a will goes through probate.  Probate is the court process of wrapping up a person’s affairs after their death.  Probate takes a long time, is generally very expensive, and is a matter of public record. Alternatively, property left through a trust does not pass through probate.  Rather, the property is distributed directly from the trust to the beneficiaries.  For this reason, many people choose to create a trust.

Second Marriages– Second marriages are common today.  Tying the knot again can present challenges, especially when it comes to how your estate plan will provide for “blended” family members from different marriages.  Separate trusts can be used to segregate assets for children from a previous marriage. Second marriages are also common after the death of a spouse.  Spouses can use separate trusts to segregate assets to ensure that in the event of remarriage after a spouse’s death, property is protected for children or other family members.

High Risk Professions– Separate trusts are also useful for “high-risk” professions such as doctors and lawyers who are subject to being sued for malpractice.  Couples can place property into the trust of the non-high-risk spouse to protect the property from creditors in the event that the high-risk spouse is sued.

Provisions for Children– Parents want their children to become responsible and independent adults. Trusts allow parents to name their children as beneficiaries but create specific guidelines for how the children will receive the property.  For example, a common trust provision is allowing the child to access the trust assets only for education or hardship until age 30, at which time the child will begin receiving income distributions.  Such a provision encourages the child to become a responsible and independent adult while still being taken care of if needed.

Want to learn more about trusts and if one might be right for you? Contact Sarah Prosser today at 734-668-4100 or email at sprosser@mitzellaw.com. Sarah is an attorney with The Mitzel Law Group PLC. They are a law firm based in Ann Arbor, Michigan that provides legal services in the areas of estate planning, trust and probate administration, business law, real estate, and tax law. Sarah Prosser and The Mitzel Law Group PLC are not affiliated with FSC Securities Corporation. FSC Securities Corporation does not provide tax or legal advice.

With over 120 years of combined legal experience among its attorneys, our expertise, professionalism, and dedication to serve our clients sets us apart from other lawyers.  Serving the Ann Arbor communities and greater Detroit Metro, contact us for more information and to find out how we can help you.

Want to talk more about financial planning? Call Dennis LaVoy today at 734-468-3050 today for a free consultation or email dennis@telosfp.com to schedule a free appointment to talk it through.

Telos Financial is Detroit’s financial advisor for Young Professionals. That includes Millennials, Xennials, Generation Xers, & anyone who is still saving for retirement. Telos is a fee based, holistic financial planning firm located in Plymouth, Michigan founded to help young professionals and families. CERTIFIED FINANCIAL PLANNER™ Professional Dennis LaVoy, CFP®, CLU® founded Telos Financial and uses his experience and knowledge to help families and individuals in Plymouth, Ann Arbor, Detroit, and across the country achieve their financial objectives.

The views expressed are my own opinions and do not apply to every situation. Your situation may vary so make sure to consult a professional for advice prior to making any decisions.