Perhaps the most important issues of a revocable trust are trustee issues. Estate planning attorneys see these issues all the time.
Who should be the initial trustees?
Ordinarily, the grantor(s) of the trust will want to be the initial trustee(s). However, sometimes it might be appropriate to have a trusted adult child as the initial trustee. This might allow for ease of administration for elderly grantors.
Who should be the successor trustees?
Sometimes, clients will want to choose successor trustees based upon birth order or other considerations. However, a good successor trustee is one who is organized and will follow the grantor’s wishes. This may or may not be the oldest child.
Who should be able to remove the trustee(s)?
During the life of the grantor, he or she typically retains the power to remove the trustee. But, after the death of the grantor, who should be able to remove the trustee? Often, the beneficiaries will be given this power.
Other issues typically involve the disposition of trust assets.
Should the assets be left to beneficiaries outright or in trust?
While clients’ knee-jerk reaction is often an outright disposition, there may be many advantages of retaining the assets in trust. This can provide divorce protection, estate tax protection in the estate of the beneficiary, and even asset protection
Should the beneficiary be able to change the disposition at his or her death?
Normally, inclusion of a limited power of appointment adds flexibility to the trust. However, sometimes the grantor will fear that the beneficiary may not exercise the LPOA in a prudent manner and, thus, deny them that power.
After the death of the first spouse, can the surviving spouse alter the distribution of trust assets?
Again, this may be done through a LPOA. Often, it makes sense. However, it often does not make sense when there are children from prior marriages.
Have you coordinated beneficiary designations?
Today, an ever-increasing share of a client’s financial wealth is held in IRAs and retirement plans, life insurance, or other accounts that have beneficiary designations. It is all too easy to overlook beneficiary designations in the planning of an estate. Be sure to consider these assets.
These seven basic questions go a long way to achieving a trust which will achieve the clients’ goals.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555