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There are a few important steps you can take when you find out that you've inherited a trust.
January 24, 2023
Please read the important disclaimers at the bottom of this post. Past performance is not indicative of future results. Not a recommendation to buy or sell securities. Nothing in this presentation is intended to be construed as investment advice.

Learning that you inherited money comes with complicated emotions as it is. When a lawyer presents you with a binder full of trust documents as you grieve the loss a loved one, it can cause frustration and confusion to skyrocket.

It is preferable to have these conversations while your loved ones are still living, so you are prepared. If that isn’t, the case, however, here are a few steps you can take to get caught up to speed.

Get To Know Your Team

Often, a trust will have (or should have) multiple professionals involved to help ensure it is managed properly. It is prudent for the beneficiary to meet with various members of the team to get your questions answered.

  • Trustee: The Trustee is charged with making sure the inherited trust is executed in accordance with your loved one’s wishes. A lawyer, CPA, trusted friend or family member could serve as the Trustee. A corporate trustee, such as a bank or trust company, is also an option.
  • Investment Advisor: No matter the size of the inheritance, it may be prudent to retain an investment advisor to help manage the assets. If the assets are to remain in the trust, professional oversight of the trust’s investments is likely required. The job of the investment advisor is to make sure the assets are invested appropriately, in accordance with both the terms of the trust and/or the goals of the beneficiaries.
  • Tax Advisor: Trusts have nuanced tax rules for both the trust itself and for beneficiaries. A professional tax advisor can help you understand your tax exposure after you inherit a trust, if any, and how to limit it over time.  

Learn About Distribution Restrictions On The Inherited Trust

When you inherit a trust, there are sometimes restrictions on your ability to withdraw funds. Gaining a thorough understanding of these restrictions through consultation with your team can help you better plan for the future.

For example, there may be an age restriction on the inherited trust which only allows distributions after a beneficiary reaches a certain age. Or there may be an interest designation, which allows beneficiaries only to withdraw interest from the trust, leaving the principal intact for future generations.

Another common restriction is the so-called “HEMS” standard, which stands for health, education, maintenance and support. In this case, the trustee must approve expenses that qualify with the HEMS criteria.

Understand The Trust's Investment Policy

If you have an investment advisor overseeing the trust’s portfolio, it is important for you to understand the investment plan. Depending on the terms of the inherited trust, you may or may not have the ability to alter the investment plan. Even if you can’t change the way the assets in the trust are invested, it is still worth understanding. You want to consider the way those assets are invested in the context of your broader portfolio and financial plan. For example, it may be prudent to adjust your risk tolerance elsewhere, such as your 401k or other investment accounts.

The complex emotions of losing a loved one and inheriting a trust can feel overwhelming. Instantly gaining more wealth through inheritance can bring on both additional security and new fears.

We believe the biggest mistake you can make in this scenario is to rush your decisions. Instead, take a step back, ask plenty of questions, and evaluate your options. An important consideration is how you want this newfound wealth to impact your life. An inherited trust may, for example, help ensure your own retirement, allow you to give back to your community, or consider future generations through ongoing estate planning.

If you have questions about trusts or other estate topics, please schedule a complimentary consultation with one of our advisors.

important disclaimers

The information contained in this presentation is qualified in its entirety by the following disclosures which must be read in conjunction with the presentation. The presentation is intended for sophisticated investors for informational purposes only and is not intended to constitute investment advice or recommendations by any party. Unless otherwise indicated, information, data, strategies and opinions included in the presentation are provided as of the byline date and are subject to change without notice. In accordance with relevant SEC advertising regulations, a full list of trades and investment recommendations is available upon request. Past performance is not a guarantee or a reliable indicator of future results. The views and strategies described herein may not be suitable for all investors. You should consult your financial advisor regarding such matters. The material contains the current opinions of the author, and such opinions are subject to change without notice. Forecasts, estimates, and certain information contained herein are based on proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. This material contains information that has been prepared from original sources and data believed to be reliable. However, no representations are made to the accuracy or completeness thereof. Investing involves a variety of risks and may be only appropriate for sophisticated persons who can afford a loss of all or a substantial portion of their investment. No part of this material may, without advance written consent, be copied or duplicated in any form by any means. There can be no assurance that any client’s investment objective will be achieved or that a client will not lose a portion or all of its investment account. The investment return and principal value of any investment will fluctuate over time. No chart, graph, or other figure provided should be used to determine which investment strategies to use or which securities to buy or sell. No figure above should be taken as a recommendation or endorsement of a specific security, sector, or strategy. References to market or composite indexes, benchmarks or other measures of relative market performance over a specified period of time are provided for information only and do not imply that any client account will achieve similar returns, volatility or other results. The composition of an index may not reflect the manner in which a client’s portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which may change over time. An index’s performance does not reflect the deduction of transaction costs, management fees, or other costs which would reduce returns. You cannot invest directly in an index.

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