“I’m all set.” I hear that from time to time from friends and relatives. They have a trust. Maybe it was created by a friend/nephew/cousin or other relative who is an attorney and who “does” estate planning on the side of his or her job as a business/litigation/real estate etc. attorney. They have a trust and think that is the end of that. I cringe and say little. There are two things I know. First, I am not going to argue with a pal about their estate plan and second, not all trusts are alike.
It seems obvious to me that trusts will vary and vary dramatically. People have different needs from their estate planning documents and most likely, those needs will change over time. Even if your life remains stable and constant, laws impacting estate plans do not. If all trusts are not alike, while what you have may seem like a good document, is it right for you?
If you visit our website (www.navigantlaw.com) you’ll find our basic description of a trust: At its most basic level, a Trust is a legal entity that can own or control assets. For many people, it is a terrific way to ensure that their assets are distributed according to their plans after their death. The person in charge of the Trust is known as the Trustee, while the person who establishes the Trust is called either the Settlor. The person whom the assets in the Trust will benefit is known as the Beneficiary. A Trust generally benefits one or more lifetime Beneficiaries and one or more after-death Beneficiaries.
So, what makes each trust different? Well, there are a lot of things that should be present in a trust document and many others which might be included. You’re thinking Navigant is one of those firms that makes legal documents long and complicated. Long? For sure the document is long. There is the necessary language about who is in charge and who gets what when. And then we get to the stuff you don’t know you need but which can potentially make administration so much easier. Things like allowing your trustee to appoint a special trustee. If your daughter is the trustee but wants her sister who is local to be authorized to handle the sale of the family home, the trustee daughter can designated the local daughter as a special trustee to handle the sale. You get the idea. The trust is robust with options to make things easier for your people. We don’t think of this as long, we think of this as thorough.
Consider: Do you have kids? Are they adults? Are they or will they be married? What assets do you own? Who gets them when you die? Who makes decisions for you if you are incapacitated? Who takes care of minor children if you can’t? What if after you die a child becomes incapacitated? What if the person you entrust with managing your affairs dies first, falls into an unhealthy lifestyle, or simply becomes distant to you? Does your trust allow each spouse to utilize his or her federal and Illinois estate tax exemption? You get the idea. Life is messy and the law is complex. There can be a lot to cover to ensure that you are protected.
Not long ago, a client brought me a trust document that had been drafted by a respected local law firm. I was quite surprised, not so much by what was in the trust, but what was missing. This is a firm that I thought knew what they were doing. To call the document thin would be a nice way of saying poorly drafted.
We believe a trust should cover what you need now, as well as the things that you may need down the road even if you don’t know that right now. While the thin trust is easier to digest, I am concerned that the only people who actually benefit from that are the settlor- it is easier to read- and the drafting attorney – it is less work to prepare. Additionally, because the trust fails to consider situations, it is more likely to result in litigation and thus will produce more work for the attorney in administration later. The people that we mean to protect, the person you make in charge as trustee and the beneficiaries, in all likelihood they are not as well protected by the “thin” trust.
I like to think of a trust as a big “if/then” analysis. When I was in college (a shockingly long time ago) I was required to take a class in the computer language of Fortran. This ran on if/then statements. If this is the situation, then this happens. If this is not the situation, then a different result should ensue. The trusts are I draft are like the software for your family if you become incapacitated or after your death. If my spouse survives me, then hold assets for the benefit of my spouse. If my spouse fails to survive me, then ask if any descendants are then living. You get the idea. I fell in love with the efficiency of this way of thinking.
But just like with software for your computer or phone, your trust needs an update now and then to remove bugs, add new features, and protect against the latest threats. The more robust the trust, the less updates will be needed, but it still should be reviewed periodically and as life events occur and the family dynamic, assets, laws and needs for the plan change. Keeping the plan up to date ensures that your family will have a better likely outcome which more closely reflects your wishes.
If you think your trust may need a reboot, or it just feels thin, give me a call at 847-253-8800. We would love to get together to chart your course.