A little flexibility goes a long way with trusts

When setting up trusts, strike a balance between considering future changes and setting clear parameters to prevent abuse
NOV 22, 2013
Trusts don't have to be entirely set in stone when a grantor decides to create one. In fact, a little bit of flexibility might even be a good thing. Such was the conclusion reached by David A. Handler, a partner in the trusts and estates practice group of Kirkland & Ellis, who spoke Thursday at the National Association of Estate Planners & Councils' annual conference in Las Vegas. Certain trust provisions ought to have some flexibility to allow for changes in the future, such as the roster of trustees. Circumstances can change drastically, affecting the people on a fixed list of trustees: an unexpected death or a conflict that puts the trustee on bad terms with the grantor or the beneficiary. Instead, the grantor should be able to name successor trustees who can serve in contingent events and appoint people who can name and remove trustees. “We can't foresee all of these events, and things are going to change,” said Mr. Handler. Power of appointment, in which the grantor gives another individual the power to amend the trust and move assets, can also be flexible in certain circumstances. In a hypothetical situation, a trust that is established for three children when they're young may eventually divide. When those children become adults, they may be ready for a power of appointment over their trust. Mr. Handler warned that while flexibility is an important component of building a trust, given that the future isn't easy to predict, grantors should know that the more flexibility they build into the document, the greater the potential for abuse. “Who you give the power to is critical,” he said. Naturally, there is a long list of important but overlooked clauses in trusts, which encapsulate all the contingencies clients don't want to think about. For instance, Mr. Handler said that trusts ought to always have a divorce clause — not so much for the grantor and the spouse, but for the kids. Another contingency: children who are born outside of a marriage and whether they are entitled to a share of a trust. “Do you want them to be an automatic beneficiary? Do they come in as a full beneficiary in the grandfather's trust?” asked Mr. Handler.

Latest News

The power of cultivating personal connections
The power of cultivating personal connections

Relationships are key to our business but advisors are often slow to engage in specific activities designed to foster them.

A variety of succession options
A variety of succession options

Whichever path you go down, act now while you're still in control.

'I’ll never recommend bitcoin,' advisor insists
'I’ll never recommend bitcoin,' advisor insists

Pro-bitcoin professionals, however, say the cryptocurrency has ushered in change.

LPL raises target for advisors’ bonuses for first time in a decade
LPL raises target for advisors’ bonuses for first time in a decade

“LPL has evolved significantly over the last decade and still wants to scale up,” says one industry executive.

What do older Americans have to say about long-term care?
What do older Americans have to say about long-term care?

Survey findings from the Nationwide Retirement Institute offers pearls of planning wisdom from 60- to 65-year-olds, as well as insights into concerns.

SPONSORED The future of prospecting: Say goodbye to cold calls and hello to smart connections

Streamline your outreach with Aidentified's AI-driven solutions

SPONSORED A bumpy start to autumn but more positives ahead

This season’s market volatility: Positioning for rate relief, income growth and the AI rebound