The Modern Trust Playbook

☕ Good morning SenseMakers!

Trusts are not a luxury item. They are a practical tool for busy leaders who want clarity, control, and privacy. This guide shows you what a trust actually does, when to use one, and how to match the right structure to your goals without getting lost in jargon.

I will be your guide, step by step, so you can take the next right action with confidence.

What a trust really does

A trust is a legal container that holds assets for your benefit and for the people you care about. You name a trustee to run it, set rules for how and when money can be used, and decide who benefits.

Why it matters for high earners:

• Keeps your family out of probate, which saves time, fees, and stress

• Preserves privacy, since trust administration happens outside the public court process

• Creates order during incapacity, so bills get paid and investments stay on track

• Lets you set guardrails for young or spendthrift beneficiaries

Two families of trusts, two different jobs

Revocable Living Trust

• You stay in control during life

• Avoids probate, improves privacy, coordinates with powers of attorney

• Does not reduce estate taxes by itself

Irrevocable Trust

• You make a completed gift and move assets outside your taxable estate

• Can add asset protection features and long term legacy rules

• Requires careful funding and trustee selection

Most households start with a revocable trust, then add one or more irrevocable trusts when taxes, concentration risk, or creditor exposure become real concerns.

The irrevocable tools you will hear about

SLAT
A Spousal Lifetime Access Trust can move assets out of the estate while preserving lifestyle flexibility through the beneficiary spouse. It must be designed carefully to avoid “reciprocal” trust issues.

GRAT
A Grantor Retained Annuity Trust can shift asset growth above a government set hurdle rate to heirs with little or no gift tax when structured correctly. Best used with assets that are likely to appreciate faster than the hurdle rate, such as pre liquidity stock or a concentrated position.

ILIT
An Irrevocable Life Insurance Trust keeps death benefits outside the taxable estate and provides liquidity to pay taxes or equalize inheritances. It is useful when you own a business or other illiquid assets.

Dynasty style trusts
In states with favorable laws, a properly drafted trust can last for multiple generations, provide creditor protection, and carry your values forward through clear distribution rules.

Founders and early employees: QSBS and trusts

If you hold Qualified Small Business Stock in a C corporation and meet the Section 1202 rules, a trust strategy can help multiply the capital gains exclusion across multiple beneficiaries. The big idea is simple. Each eligible non corporate taxpayer can have its own exclusion. With thoughtful planning and early gifts, families may stack exclusions across trusts.

Timing matters. The best window is early, before meaningful traction drives up valuation and consumes lifetime gift exemption. If company value is already high, there may still be a case for a smaller gift. The principle is to align the size and timing of gifts with your overall plan.

➡️ Hear the full breakdown with examples
Listen to my podcast conversation on QSBS and trusts: The Billionaire Trust Strategy You Have Never Heard Of

Choosing the right trustee and state

Your trustee is the operator of your plan. You can name a trusted individual, a corporate trustee, or both. Many families use Nevada or South Dakota based trustees for enhanced asset protection features and administrative strength. What matters most is competence, responsiveness, and a clear alignment with your goals.

How to match goals to structures

• Avoid probate, keep order → Revocable Living Trust, updated powers of attorney

• Reduce future estate taxes → SLAT, Dynasty style trust, ILIT funding

• Move excess growth outside the estate → GRAT for high appreciation assets

• Protect assets from future creditors → State specific irrevocable trust design and corporate trustee

• QSBS optimization → Early gifts to well drafted irrevocable trusts

Funding and coordination

A trust that is not funded is a promise without action. Retitle accounts and real estate, update beneficiary forms, and coordinate with your equity comp, partnership interests, and buy sell agreements. Keep a simple asset map and review it during each strategy session.

Common mistakes to avoid

• Waiting until a liquidity event is imminent

• Naming the wrong trustee or giving them no guidance

• Failing to fund the trust or update beneficiaries

• Ignoring state estate taxes or residency rules

• Overcomplicating designs that will never be maintained

• For founders, delaying QSBS gifts until valuation makes them costly

Making Sense of Trusts

Trusts are tools, not trophies. The goal is a simpler, stronger plan that protects your family, respects your privacy, and aligns your wealth with your purpose. If you are an executive with concentrated stock, a business owner planning a transition, or a founder thinking about QSBS, the right trust at the right time can be the difference between a stressful scramble and a calm handoff.

When you are ready, we are happy to walk you through it, one step at a time.

As always, I hope this helps you to Prioritize Your Version of a Rich Life.

Until next week!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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