If your estate planning attorney and accountant have two very strongly diverging opinions about your trusts, it’s possible that your family trusts are no longer solving a problem, advises an article from Forbes, “Why You Might Need To Fix Your Family Trusts.” This happens for a few different reasons:
- Poor Set-up. The trust wasn’t created properly, and the lawyer drafting the trust didn’t truly understand the wishes of the family;
- Poor Writing. The language in the trust is inappropriate or too vague, which can cause issues; and
- Poor Planning. The trust isn’t viable anymore because situations change, and the document wasn’t created in a way to adapt to a shifting environment.
The law is constantly changing. As a result, there are new legal strategies and structures that are better for some situations than a trust. An experienced trust attorney should be consulted about all of the options for your situation.
For any family, there’s bound to be specific reasons why they need to fix their trusts.
Most problems, however, can be categorized in three areas:
- The trust doesn’t have provisions to provide necessary distributions to family members;
- The governance structure or rules of the trust may not provide for effective management or sufficient oversight; and
- The trust is tax inefficient.
When any of these situations occurs, there are ways to make sure the trusts work along with the needs and wants of the family. A trust that has any of these issues won’t be effective. The trust must be fixed or replaced to achieve the family’s goals.
It’s wise to periodically review trusts to be certain that they’re satisfying the intended objectives and taking advantage of all of the possible benefits. In addition, make sure that all assets owned at the time of creation of the trust and any assets subsequently acquired are titled properly and are aligned with the trust. If not, your instated plan will most likely fail. A trust attorney may be able to make some adjustments that are significantly advantageous to the family.
The use of trusts is not always a simple matter, but if changes are needed because the trusts are not working for the family’s benefit, you’ll want to review them with an estate planning attorney who helps clients with trusts. A second opinion may be warranted. You want to be sure that the trusts follow the wishes of the family, while also solving tax and distribution issues.
As part of our ongoing client care program at Family Estate Planning Law Group, we continually review trust documents and verify, track, and align your assets to make sure things like your trust are remaining effective and up to date.
Reference: Forbes (October 17, 2018) “Why You Might Need To Fix Your Family Trusts”