In the past, estate planning has tended to focus on objectives like protecting assets against creditors’ claims or lawsuits and minimizing gift and estate taxes. While these are still important goals, many affluent families are now turning their focus to less technical but equally important considerations, such as ensuring the younger generation’s education, preparing them to responsibly manage wealth, encouraging charitable giving, and promoting shared family values. A family advancement sustainability trust (FAST) is one tool families are using to accomplish these goals.
FAST use and composition
FASTs are typically utilized in states that:
- Allow perpetual, or “dynasty,” trusts, which can benefit multiple generations into the future
- Have directed trust statutes
- A directed trust statute allows the creator of a trust to appoint an advisor or committee to direct the trustee on certain matters
- Directed trust statutes allow for family members and trusted, skilled advisors to participate in a trust’s governance and management
FASTs are commonly organized using a governance structure that includes four decision-making entities:
- An administrative trustee: The administrative trustee is often a corporate trustee, and handles administrative matters but not investment or distribution decisions.
- An investment committee: The investment committee typically consists of family members and a professional, independent investment advisor, who handles the investment of trust assets.
- A distribution committee: The distribution committee typically consists of family members and an outside advisor who works to ensure that trust funds are used in a way that promotes the trust’s objectives and benefits the family.
- A trust protector committee: The trust protector committee is usually composed of one or more trusted advisors. The trust protector committee serves in place of the grantor after their death. It makes decisions about the amendment of the trust document for tax planning or other purposes and the appointment or removal of trustees and committee members.
How to establish and fund a FAST
Establishing a FAST during your lifetime helps to ensure that the trust will achieve your goals and enables you to educate advisors and family members on the trust’s guiding principles and purpose.
Since the bulk of the funding for a FAST is provided upon the death of the older generation, FASTs typically require little funding when created. It’s usually better to fund a FAST using life insurance or a well-structured irrevocable life insurance trust (ILIT), rather than using funding from the estate, since funding the trust through life insurance allows you to achieve your objectives for the trust without depleting any assets your family might otherwise benefit from.
Contact us for more information
FASTs are flexible and can be used to accomplish a variety of goals, depending on how you structure them to meet your family’s specific needs. When well-designed and implemented, they can help educate your heirs about important family values, prepare them to receive wealth, and maximize the chances that they’ll accomplish their financial goals. For more information on setting up a family advancement sustainability trust, contact us.