Trusts are highly valuable, effective instruments for estate planning, asset protection, and other needs. But as you do your research, you might wonder whether there are any disadvantages of a trust and, if so, how you can counteract them.
In truth, a properly set up trust – drafted by experts with over a century of collective experience shared between them – will have practically no downside for you to worry about. Still, let’s overview some of the most common “disadvantages” of trusts and how Dominion overcomes them for your benefit.
Loss of Control
Setting up the trust necessitates you giving up some amount of control of the assets you place within the trust. Even if you choose an unprotected revocable trust for something like estate management, you still technically give up direct control of the assets in the trust (unless you are the trustee in addition to the grantor).
For many high-net-worth individuals, especially those who clawed their way to wealth and real estate ownership, this can be a disconcerting element. It’s tough to relinquish the control that you worked so hard to acquire.
Proper Management Negates This Downside
That all said, so long as you have a good manager and a good asset protection plan, this downside can practically be eliminated. If your trust is set up with the right paperwork and is organized to be run in a certain way, you can trust that the assets within the trust will be kept safe and used according to your wishes.
Loss of Asset Access
Similarly to the above disadvantage, putting assets in a trust means you don’t have immediate access to them. Even if you have a very open, revocable trust, taking assets from the trust to your personal bank account or elsewhere requires filing paperwork and extra time.
Good Trust Setup Minimizes Inconvenience
Once again, however, this might not truly be a downside if you practice proper trust setup. For example, if you do a lot of analysis and consideration and make sure only to put certain assets into your trust, you'll never suddenly need to dip into the trust to take those assets back out.
Strong financial planning is a hallmark of excellent wealth management. It’s something we can control and assist with when you work with Dominion for trust setup and administration.
Cost
Setting up the trust, particularly a premium, perfectly-written trust, can cost quite a bit. Trust setup costs include:
- Legal counsel fees
- Trust maintenance fees, typically paid annually
- Filing and title transfer fees (if applicable)
- Trustee compensation
- And more
Even though probate court can cost more than trust maintenance, it’s still something to keep in mind. Understanding the long-term costs of trust formation and maintenance is important if you are setting up the trust and have a tight budget, as well.
Quality is Worth the Cost
That all said, the experts at Dominion don’t believe that there’s a price you can put on true quality and ironclad asset protection.
You’re already a high-net-worth individual. Whether that means you have a net worth of $10 million, $20 million, or much more, you already have enough money to pay for the best. So why not get it?
You can also think of trust fees as necessary expenses to keep your overall estate and wealth shielded. You don't need to go for the budget-friendly, affordable, corner-cutting option. You can afford protection that offers unparalleled peace of mind and, even better, asset defense that pays for itself over time.
You read that right. The ideal asset protection trust, in fact, can invest your assets in such a way that the dividends or profits you make from those investments cover all of your trust maintenance fees. In this way, the cost of maintaining or managing your trust doesn't need to come out of your own pocket.
The legal services available to you become better and higher-quality the more you make. High-net-worth individuals like doctors, entrepreneurs, and more can afford premium asset protection – it’ll be a drop in the bucket compared to the money you’ll save (and make) with a premium asset protection instrument.
Even if that weren’t true, ask yourself which would cost you more in the long run – an asset protection trust you have to pay for every year that guarantees total defense for your estate, liquid capital, and other wealth, or a devastating legal battle that leaves you penniless and reeling from aggressive creditor claims and lawsuit damages? The answer is obvious.
Recordkeeping Complexity
On top of the above disadvantages, setting up a trust does necessitate a little extra complexity in terms of recordkeeping and bookkeeping. For instance, if you transfer property into an asset protection trust or other trust vehicle, you’ll have to make sure your records are very accurate and well-kept.
This is important both for asset protection (in case a judge or creditor wants to see whether you truly own an asset or not) and for liability reasons.
Rely on Experts for Assistance
Even though it's true that trusts require a little extra recordkeeping due diligence, it's also true that you don't necessarily need to do all that extra work! In fact, when you work with premium trust setup specialists like Dominion, you can rely on experts from your legal partners to tackle all this work for you.
Part of good trust management and administration is keeping tight, accurate books. Therefore, you can rest assured that when you set up a trust with Dominion, our trust lawyers and administrators will do all the heavy lifting in this regard.
We’ll make sure your trust’s books are accurate, that you know when you need to update your personal books, and much more. We’re with you for the long haul, so you can rely on us for years to come.
High Need for Competency
Perhaps the biggest potential downside to a trust is the incredibly high need for competency. Whichever trust you set up, you’ll need to give ownership and administration control to the trustee for the entire instrument.
If you place tens of millions of dollars, property, and other valuable assets into the trust, you need to be 100% certain you can trust that trustee to get the job done and to carry out your orders as originally envisioned.
That’s a lot of responsibility, even if you know the trustee personally (and you oftentimes shouldn’t for asset protection purposes).
What if the trustee doesn't follow your instructions? What if the trustee interprets your instructions poorly? What if the trustee is suddenly out of reach or uncommunicative when you need to speak to them? These are all questions that first-time trust users may have rattling around in their heads.
The Right Advisors Will Help You Choose a Top Trustee
Just like many of the above disadvantages, finding the right team to work with and setting up your trust carefully will negate this particular possible downside.
When you work with experienced, capable financial advisors and legal experts, just like the kinds we employ at Dominion, they will help you choose the right trustee for your needs. In fact, at Dominion, we employ trust lawyers who have extensive experience in trust management, administration, and asset distribution.
Our trust lawyers know every trick in the book and have already been trusted to oversee the asset protection strategies of other high-net-worth individuals.
These trustworthy individuals and companies are exactly who you want to oversee your trust, particularly if you want to defend your assets against legal and financial inquests. So long as you choose the right trustee, you'll meet your need for competency, and this won't be a disadvantage whatsoever.
You can rest assured that Dominion’s experts will help you select the right trustee for your asset protection trust.
This individual won’t have any connection to you, which will provide even more shielding in the event of a legal claim (after all, if you don’t know your trustee on a personal level, a court or creditor can’t claim that you are unduly influencing them or that you can influence them to distribute assets of the trust for payment purposes).
Trusts offer amazing benefits, but they also come with potential downsides like loss of control, limited access to assets, costs, and recordkeeping difficulties. The good news? These can be easily mitigated.
At Dominion, we have over a century of combined experience setting up trusts that protect your wealth and legacy. We help you structure your trust to maintain control, minimize inconvenience, and choose the right investments to offset costs. We even handle the complex recordkeeping so you don’t have to.
Remember, the peace of mind that comes with a well-structured trust is priceless. Don’t let fear of the downsides hold you back from securing your future.
Let Dominion help you create a trust that truly works for you.
Is a Trust Worth It?
All the disadvantages of a trust can be negated, minimized, or eliminated with the right setup, planning, and procedures. Seen in this light, it's clear that a trust is absolutely worth it for high-net-worth individuals, whether you're looking for estate management, estate planning, or asset protection benefits.
A trust is even more worthwhile when you consider the fact that other asset protection strategies aren't nearly as defensive or as maintainable over the long term. A good trust is the number one best way to protect your assets and wealth for decades to come.
Still have questions? We can answer them when you contact Dominion today.
We’ve protected and managed hundreds of millions of dollars for our clients over the years, and we are certain we can do the same thing for you. Get in touch with one of our representatives to learn how we can help you achieve your goals.
