All good wealth management includes estate planning as a component. Changes in the tax laws, modern trust conventions and family changes make periodic reviews of estate plans a real necessity. While the contemplation of a client's demise is never at the top of anyone’s list, there is satisfaction from the feeling that you have taken care of issues and that your client has provided for their loved ones. But unwitting mistakes can wreck a client's careful planning and even lead to family fighting and estrangement.
Here are nine estate planning tips you can give clients to make sure their family stays together after their gone.
Barbara S. Wahl is a Complex Litigation partner at Arent Fox in Washington, DC, focusing on trust and estate dispute resolution, including mediation, arbitration and litigation.
Holly M. Bastian is an Estates & Trusts partner at Arent Fox in Washington, DC and focuses her practice on the preservation of wealth and the transfer of that wealth from generation to generation.
1. 4. Don’t Hamstring Your Trustees But Ensure Accountability
When creating a trust, the instrument should not try to dictate the timing and purpose of every distribution but provide general guidelines of what is acceptable. Choose the right trustees and give them broad discretion and authority. Consider giving trustees the authority to terminate the trust under circumstances that your client set forth in the instrument. Consider whether to include specific provisions as to how the trustees will be paid, i.e. by statutory formula as applicable in some states, by hourly rates, or otherwise.
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2. 5. Consider Trust Protectors for Irrevocable Trusts
A trust protector is a fiduciary, separate from the trustee, whose role is to ensure that the trust’s purposes are being satisfied. Toward that end, he/she can be given the power to remove and replace a trustee, to amend trust agreement if the terms no longer carry out the grantor’s intent or to achieve tax objectives, and to change the situs of the trust. Consider designating a trust protector for longer term trusts, such as trusts that may continue for more than one generation. If you choose to use a trust protector, the role of the trust protector and his/her powers should be carefully spelled out in the trust instrument.
It's also important to be aware of the potential fiduciary liability complications that can arise when using a trust protector, though they are beyond the scope of this gallery.
3. 6. Trust Beneficiaries Should Not Be Left in the Dark
Notwithstanding a grantor’s wishes, all beneficiaries are entitled to a copy of the trust agreement as a matter of law. Clients should consider spelling out in the trust instrument the frequency of the trustee’s reporting to current income beneficiaries and what information they are entitled to receive from the trustee. Also, keep in mind that in most jurisdictions, remainder beneficiaries are entitled to be kept reasonably informed about the administration of the trust and of the material facts necessary to protect their interests.