Naming Your Family Trust Fund
Establishing a trust fund is a common concern for families that have assets they want to pass on. Trusts are useful for holding your property or funds in order to avoid probate or set aside means for your grandchildren to provide for their living expenses.
Trusts are also used for donating appreciated stock to charity with the dividends regularly paid out for supporting a cause, lowering your estate tax, or protecting your children's inheritance from existing or potential creditors.
You have many options when naming a family trust. If you want to establish a legacy or a trend of naming and numbering trusts, you could do so. You may want to make it as untraceable as possible, or simply name it for the person you are leaving the trust to.
A Family Trust Needs a Name
A trust fund is a distinct, legal entity with its own identity and tax identification number, much like a corporation. It can own assets just as a person can. If the trust instrument permits, it can borrow money the same as a person can.
Similar to the way a company needs a name to identify itself, a family trust must have something to put on the title deeds, stock certificates, receipts, accounting records, and tax documents.
Family Name With a Date
The most common choice when naming your family trust fund is to use the family name plus some date designation.
It sounds very simple, and it is, which is the reason so many attorneys and individuals opt for this method. The most common names given to family trusts tend to be a combination of:
- The name of the person establishing the trust fund and/or gifting the property to the trust
- The words "Family Trust"
For example, if John Smith wanted to name a family trust, he might call it the "John Smith Family Trust." It's mundane, but it leaves no doubt as to what it is.
Some people, especially wealthy families that establish multiple types of trusts with multiple beneficiaries over many decades, have a habit of affixing the year of establishment, too.
As an example, if you had seen Donald Trump's financial disclosures in his run for the 2016 Republican nomination for President of the United States, you may have noticed that when naming his family trust, Donald's father Frank opted for:
- The Fred C. Trump December 16, 1976, Trust for the Benefit of Donald J. Trump
- The Fred C. Trump December 16, 1976, Trust for the Benefit of David Desmond
- The Fred C. Trump December 16, 1976, Trust for the Benefit of Robert S. Trump
- The Fred C. Trump December 16, 1976, Trust for the Benefit of Elizabeth J. Trump
- The Fred C. Trump December 16, 1976, Trust for the Benefit of Maryanne T. Barry
- The Fred C. Trump December 16, 1976, Trust for the Benefit of Fred C. Trump III
- The Fred C. Trump December 16, 1976, Trust for the Benefit of Mary Trump
Sometimes, the date isn't technically part of the family trust name but used as an organizational tool. The vast Rockefeller family fortune, by way of illustration, is largely arranged around two primary sets of trusts known as the "1934" trusts, which were those the oil tycoon created for his children, and the "1952" trusts, which his son, John D. Rockefeller, Jr., created for his grandchildren (the fourth generation of Rockefellers).
By most accounts, the Rockefeller fortune is now held across hundreds of trusts, and almost all of the wealth stems from these two collections.
Back to the Fred Trump example: the real estate mogul also created several other family trusts with different naming conventions, including a couple of grantor retained annuity trusts (GRAT).
A GRAT is an estate planning technique using an irrevocable trust (cannot be changed or dissolved once established) designed to minimize tax liabilities when transferring large amounts of money among multiple generations of a family.
More specifically, the grantor receives an annuity for a set amount of time while the value of the assets themselves are separated from the main estate, allowing any appreciation on them to escape estate tax limits:
- Fred C. Trump, GRAT Trust for the Benefit of Elizabeth Trump Grau
- Maryanne Trump GRAT Trust for the Benefit of Elizabeth Trump Grau
On top of this, at the time of his death, his will created several family trusts (testamentary trusts) where this general naming convention was followed:
- Trust Under Will of Fred C. Trump for the Benefit of Elizabeth Trump Grau
- Trust Under Will of Fred C. Trump for the Benefit of the grandchildren of Fred C. Trump
- Trust Under Will of Maryanne Trump for the Benefit of the grandchildren of Fred C. Trump
Other wealthy families opt to name their family trust sequentially. For example, it is not unusual to see:
- The John Smith Family Trust I
- The John Smith Family Trust II
- The John Smith Family Trust III
Named After the Beneficiary and the Purpose
Another common choice when naming a family trust is to name the trust fund after the beneficiary and state the purpose of the trust. Imagine your name was Franklin Gardener. You have four children: James, John, Sarah, and Charlotte.
You set aside 50% of your estate for them, instructing that 4% of the value will be distributed each Christmas and that the money must be invested in dividend stocks, with the entire trust corpus distributed in full on their 65th birthday. You might name these family trusts:
- The James Gardener Dividend Trust
- The John Gardener Dividend Trust
- The Sarah Gardener Dividend Trust
- The Charlotte Gardener Dividend Trust
You then reserve another 40% for your grandchildren, as a class, whom you want to help attend college. You name this family trust:
- The Franklin Gardener Educational Trust
Finally, you put aside the remaining 10% of your estate for charity. You structure it as a charitable remainder trust meant to benefit wildlife conservation and call it:
- The Smoky Mountain Wildlife Charitable Trust
Anonymous Naming for Privacy
One of the problems with the aforementioned approach is the substantial lack of privacy it creates. If you were to build a nest egg over the years and become a secret millionaire, you may not want anyone else to know how much money you have or what you own.
When you die, you leave your grandchildren a pile of capital that is used to buy a $2,000,000 apartment building, the rents to be distributed quarterly for their enjoyment.
You want them to be able to buy new cars, pay for school, cover their bills, or take vacations. You name the trust after yourself. If you have a unique name like Beatrix Adlersflügel, you could call it "The Beatrix Adlersflügel Family Trust."
While there is nothing wrong with this, you essentially created a public record of your family's inheritance and income. Anyone can go down to the country recorder and find out the name of the owner on the title deed of the apartment building, as well as the assessed value. Using that information, they can start digging around to see if they can find any other holdings.
Instead, you could use an intermediary—such as having the trust establish a limited liability company (LLC)—if the estate were large enough to warrant the trouble and cost.
Beatrix could have named her family trust "Crescent Ridge Capital Trust" then have it establish a Nevada LLC (one of the most anonymous and least taxed) and named "20938 Main Street Property, LLC."
She could have all of the paperwork signed by an attorney at a branch office in Nevada with no public record of her family's name on any of the documents, with the distributions made to an isolated bank account that serves no other purpose than to collect incoming funds
Done correctly, there is almost no way a person could discover the owner of the apartment building, let alone figure out by reasonable deduction who the beneficiaries were. As long as your heirs can avoid overly conspicuous spending and letting everyone know about the windfall they received, it should all stay reasonably anonymous.
Benefits of an Anonymous Trust
If your descendants are ever unfortunate enough to be in a serious car accident or do something that results in a creditor trying to go after them, the other party might be inclined to walk away or settle for less because they do not know the person's worth.
None of this is necessary if you are leaving your family $500,000 in blue-chip stocks, index funds, corporate bonds, and MLPs to be managed by Vanguard's trust division for what amounts to a 1% to 3% fee.
While this might sound like a lot, $7,000 to $15,000 per year for providing all trust services on a portfolio of that size is more than reasonable, especially given the fiduciary risk the firm must take upon itself.
Regardless, it doesn't hurt to opt for a hard-to-trace family trust name. Open the dictionary and scan random pages. Throw darts at a map, look up historic battles, use a word generator or town name generator online to have it create terms for you.
You can even create acronyms if you'd like. Just make it hard to trace so snooping eyes can't figure out what's on your family's balance sheet.