Thursday, July 24, 2014
As families reunite, it is a good time to review any trusts created during a family member’s lifetime or at death. Because families can often have a variety of trusts, created at different stages during different stages of their lives, it is common that they have not updated them in awhile.
Accordingly, if estate planners do not stay on top of these changes, problems are bound to arise. Many trusts are irrevocable, meaning that the grantor cannot modify their terms. However, depending upon the trust’s provisions, the trustee’s powers and the state’s laws, there may be strategies to administer them more flexibly.
Some common problems that occur when trusts are not updated are when distribution ages occur earlier than preferred and assets may appreciate more dramatically than anticipated. In situations like this, one option is not to put any additional money into the trusts and instead create new trusts with extended distribution terms for any future transfers. Another choice may be to rely on the terms of the trust and state law to enable the trustees to distribute the trust property to different trusts for the benefit of the beneficiaries with a stretched out distribution schedule.
Some of the issues that arise with old trusts can be evaded by making new trusts as flexible as possible. “Trusts are live, dynamic documents and must be managed and reviewed as laws and family circumstances change.”
See Judith Saxe, Old Trusts, New Problems, Private Wealth, July 23, 2014.
Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.