Does a FAST make sense for your estate plan?

On the one hand, you want your estate plan to achieve certain “technical” objectives. These may include minimizing gift and estate taxes, and protecting your assets from creditors’ claims or frivolous lawsuits.

On the other hand, you also want your plan to achieve “aspirational” goals. These may include preparing your children or grandchildren to manage wealth responsibly, promoting shared family values or encouraging charitable giving. One trust to consider including in your estate plan is a family advancement sustainability trust (FAST).

FAST funding options

If you’re interested in the goals described above, it’s a good idea to establish a FAST during your lifetime. Doing so helps ensure that the trust achieves your objectives and allows you to educate your advisors and family members on the trust’s purpose and guiding principles.

A FAST generally requires little funding when created, with the bulk of the funding provided on your death. Although funding can come from the estate, a better approach is to fund a FAST with life insurance or a properly structured irrevocable life insurance trust (ILIT). Using life insurance allows you to achieve the FAST’s objectives without depleting the assets otherwise available for the benefit of your family.

4 decision-making entities

Typically, FASTs are created in states that 1) allow perpetual, or “dynasty,” trusts that benefit many generations to come, and 2) have directed trust statutes, which make it possible to appoint an advisor or committee to direct the trustee regarding certain matters. A directed trust statute makes it possible for both family members and trusted advisors with specialized skills to participate in governance and management of the trust.

A common governance structure for a FAST includes four decision-making entities:

1. An administrative trustee — often a corporate trustee — that deals with administrative matters but doesn’t handle investment or distribution decisions,
2. An investment committee — consisting of family members and an independent, professional investment advisor — to manage investment of the trust’s assets,
3. A distribution committee — consisting of family members and an outside advisor — which helps ensure that trust funds are spent in a manner that benefits the family and promotes the trust’s objectives, and
4. A trust protector committee — typically composed of one or more trusted advisors — which stands in the shoes of the grantor after his or her death and makes decisions on matters such as appointment or removal of trustees or committee members and amendment of the trust document for tax planning or other purposes.

Bridging the leadership gap

In some families, it’s not unusual for the death of the older generation to create a leadership gap. A FAST can help fill this gap by establishing a leadership structure and providing resources to fund educational and personal development activities for younger family members. Contact your estate planning advisor for additional details.

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