Retirement Planning


We believe that part of the reason to hire a retirement planner and CFP® professional is to help guide you through the complexities of retirement and direct you to the appropriate tools for your situation and assist you in using your tools appropriately.

Trusts are often one of the most misused retirement planning tools we review with our clients. Along with annuities, bonds and life insurance, they are also among the most misunderstood.

Some common examples of misuse we’ve seen include:

  1. Creating a trust but not funding it.
  2. High and ultra-high net worth clients using revocable trusts as their entire estate plan.
  3. Believing your assets are protected in any type of Revocable Trust

Trusts can be tremendously useful if used appropriately. Like any financial tool, they have positives, negatives, special features and limitations. They are not a be-all end-all solution for retirement planning. Often, we see people who own trusts that don’t follow through with them. We also encounter people who could really use a trust, but unfortunately have the wrong type.

When engaging in advanced planning with complex tools like legal trusts, working with a retirement planning professional and firm as a trusted partner to help guide the way may be a highly beneficial decision.

While there are a vast number of types of trusts available for use, the ones we commonly see in retirement planning are:

  1. Revocable Living Trusts
  2. Irrevocable Trusts

Revocable Living Trusts

Revocable Living Trusts are a tool that is similar to a Last Will and Testament. They are designed to place your assets inside them when you are alive, and direct to whom will receive your assets when you pass away.

Benefits of Revocable Living Trusts include that they are less likely to be successfully challenged in court compared to just having a Will, the assets inside them avoid probate, and if you are incapacitated while living a ‘successor trustee’ can normally manage those assets on your behalf.

Some downsides include the fact that they provide no asset protection, which means that in the event of a lawsuit, the assets inside the trust are completely vulnerable.  Additionally, any assets inside the trust are part of your estate. This means they would be subject to any estate tax owed and subject to the claims of creditors.

Irrevocable Trusts

Irrevocable Trusts are tools that remove assets from your estate and place them beyond your control while you are alive. This removes them from being subject to creditors and potential lawsuits. This also eliminates any potential estate tax that may be due, so long as applicable rules and regulations are followed. You must gift assets into an irrevocable trust, subject to annual or lifetime exemption limits, or pay the tax on the contribution to the trust.

Some irrevocable trusts, like Charitable Remainder Trusts, allow you to gift the assets into the trust, receive an income tax deduction today, and still live off income generated. The remainder of the trust assets go to charity upon death.

Irrevocable Trusts are often used in conjunction with life insurance policies or investment accounts to maximize the amount of dollars you pass on to loved ones or charity in a tax-advantaged manner. You can also include provisions that restrict access to beneficiaries allowing you to retain some measure of control of how the money is spent from ‘beyond the grave’.

There are several different types of irrevocable trusts that may be right for your situation. Some common irrevocable trusts are Life Insurance Trusts, Charitable Trusts and Dynasty Trusts. We will explore the options with you, to help you make a better choice.

Attorneys should be used to draft trusts to better ensure the law is followed and to better ensure the trust will accomplish your desires. An investment manager can help manage the assets in your trust and optimize the investment structure, per your objectives.

Trusts often aren’t the only option you have regarding charitable, estate and asset protection planning.

Your retirement professional at Oak Harvest will get to know your situation and help educate you on the various tools available, including and beyond trusts, and then direct you to the correct attorney to complete your planning. This is all part of the Oak Harvest Path.

For more advanced estate and legal planning strategies you will sit with our founder and senior planning strategist, Troy Sharpe, CFP®, to discuss your situation in detail. We believe that CERTIFIED FINANICAL PLANNER™ professionals are the quarterbacks of the financial team and should be the first person you see before visiting an attorney or CPA for sophisticated financial planning needs.

Oak Harvest Financial Group is not a legal firm and does not provide legal advice or draft legal agreements. 

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