Data Entry: Trust Owned Assets

Adding Trust-Owned Assets to Net Worth

Trust Owned Investment Accounts

For clients with invested assets held in trust accounts, use the Profile > Net Worth area to illustrate all relevant details in the client's plan. RightCapital allows you to input the follow trust types as investment account "owners":

  • Revocable Trusts
  • Credit Shelter Trusts (CST's)
  • Charitable Remainder Trusts (CRT's)
  • Spousal Lifetime Access Trusts (SLAT's)
  • Qualified Terminable Interest Trusts (QTIP's)
  • Grantor Retiained Annuity Trust (GRAT's)
  • Intentionally Defective Grantor Trust (IDGT's)

Reflect trust-owned investment accounts by opening the client's plan > select Profile > Net Worth. Choose Add Account > Investment. From the owner field, select Trust.

When the Owner is changed to Trust, the following options will be available available under Account Type: Revocable Trust, Credit Shelter Trust, Charitable Remainder Trust, Spousal Lifetime Access Trusts, Qualified Terminable Interest Trusts, Grantor Retained Annuity Trusts, Intentionally Defective Grantor Trusts.

For each trust type, add relevant information that will impact the financial plan. Use the information below as a guide for entering data:

Revocable Trusts

Once revocable trusts are assigned as the owner of an account, the assets will be listed in the ‘Trust’ column on the client's Balance Sheet. These accounts will be included in the taxable investments and can be used to fund cash flow deficits. The percentage of taxable investments associated with a Revocable trust will be excluded from probate costs in the Estate > Analysis module.

Irrevocable Trusts

For the following Irrevocable Trusts, except QTIP's, specify the Income as either a fixed dollar amount each year or as a percentage of the trust account value; select the option under Income type and enter the amount/percentage accordingly.

Specify how long the income will be received using the Income Term drop-down; this can be either for clients' lifetime or can be set to a specific ending year. The Starting Year is when income will begin.

If there is an annual fee as a percentage of the trust value, enter that under Trust fees; that will reduce the client's value accordingly.

Lastly, include any specific assets in the account by selecting either Add Holding/Add Asset Class, or Total balance approach and completing the information accordingly. When complete, click  Save.

For additional details for each trust see information below:

Credit Shelter Trusts (CST's)

Once Credit Shelter Trusts are entered into the Net Worth they will be listed in the trust column on the client's Balance Sheet. Assets in the CST are held outside the estate and will reduce federal estate taxes when applicable.

Charitable Remainder Trusts (CRT's)

Once Charitable Remainder Trusts are assigned as the owner of any investment account in a financial plan, it produces income for the beneficiary over a period of time before the remainder is donated to charity.

Spousal Lifetime Access Trusts (SLAT's)

Once entered into the client's Net Worth, SLAT's allow for the transfer of assets from one spouse to another, including income before or after the original grantor’s death. Since the Grantor is responsible for taxes on income generated by the trust, you will need to indicate details within the "Grantor" dropdown menu.

Qualified Terminable Interest Trusts (QTIP's)

Once entered into the client's Net Worth, QTIP Trusts provide income for a surviving spouse while remaining assets are transferred to specific heirs. The client will be taxed on the income generated within the trust account. RightCapital will automatically calculate the income amount that enters the cash flows as interest plus dividends. The QTIP Trust's value will be included in the taxable estate at the end of the planning horizon.

Grantor Retained Annuity Trust (GRAT's)

Once entered into the client's Net Worth, GRAT's provide income to the grantor while the remaining value, is passed to beneficiaries without incurring gift taxes. Since the Grantor is responsible for taxes on interest, dividends and gains generated by the trust, you will need to indicate details within the "Grantor" dropdown menu. The annuity income stream is not taxed as it enters the client's plan.

The Remainder interest represents the value that the client will be taxed on, or the amount that will lower the estate tax exclusion amount within the plan. This amount is typically calculated when the GRAT is established, and will need to be manually input.

If the grantor dies within the GRAT term (Income term) of the trust, the remaining value is added back into the plan as income. If the client outlives the GRAT, the appreciation assets are passed to beneficiaries tax-free.

Intentionally Defective Grantor Trust (IDGT's)

Once entered into the client's Net Worth, IDGT's provide income to the grantor while the remaining value, is passed to beneficiaries without incurring taxes. Since the Grantor is responsible for taxes on interest, dividends and gains generated by the trust, you will need to indicate details within the "Grantor" dropdown menu. The annuity income stream is not taxed as it enters the client's plan.

When created assets are sold to the trust instead of gifted to avoid gift taxes. Therefore, instead of an income stream annuity, the assets can be sold for a note receivable. Indicate the Income amount, the Note balance and Interest rate for the trust. RightCapital will take whatever is left in the note balance at the end of the income term and add it as a baloon payment to the financial plan.

If the grantor dies within the IDGT term (Income term) of the trust, the remaining value is added back into the plan as income. If the client outlives the IDGT, the appreciation assets are passed to beneficiaries tax-free.

Trust Owned Properties

Any property entered into RightCapital be owned by a Trust. Properties listed with ‘Trust’ as the owner will display in the ‘Trust’ column on the Dashboard / Balance Sheet and will be excluded from probate calculations on the Estate / Analysis screen. Reflect these assets by adding a Trust-owned property into the Client's Net Worth. Navigate to the client and select Profile > Net Worth. Select Add Account > Property. From the owner field, select Trust.