It is common for clients to have at least one fairly specific concern regarding their estate plan. It is even more common for clients to have additional concerns after we explain the traditional flow of assets, trust distribution structures, and fiduciary discretion. Our job as estate planners is to have solutions to those concerns that are clearly drafted and practical to administer.
We recognize that clients and advisors often discuss the structure of an estate plan before we are involved. In order to assist with those discussions, we’ve put together the most common issues and concerns brought up by clients and some of our solutions to those issues.
| Issue/Concern | Drafting Solution |
| 1. “I’m not comfortable with my spouse controlling the assets I leave him in trust if he remarries.” | Surviving spouse must serve as Co-Trustee with a child, trusted individual, or corporate trust company if he remarries (or romantically cohabitates with someone), or not serve as Trustee over that trust at all. |
| 2. “I’m concerned about distributions from my child’s trust being commingled with her spouse’s assets.” | Any distributions from a child’s trust must be deposited into an account designated as the child’s “separate property.” |
| 3. “Even though distributions from my child’s trust are separate property, I’m still concerned that it may be unclear what happens to those distributed assets if my child gets divorced.” | Child may only become/remain sole Trustee of his trust by entering into a premarital agreement with his spouse that is approved by a designated third-party. |
| 4. “I want my personal effects to be divided in a fair manner and I don’t want to leave that up to the Executor/Trustee at that time.” | Personal effects are distributed based on one of the following methods chosen by the client: (1) coin flip for each item; or (2) round robin with each beneficiary selecting one item on her turn. |
| 5. “I do not want large distributions made to my children for ‘maintenance and support.” | Distributions are limited to a percentage of the trust assets each year. Generally, exceptions to the limit are included for health and education. |
| 6. “I want all of the protections of a trust for the assets I leave my child, but I want my child to control the assets.” | Set an age that the child may become Co-Trustee and/or sole Trustee of his trust. This allows the child to control the trust but retains the protections afforded to assets held in trust. |
| 7. “I want my child to solely control certain amounts of her trust at certain ages.” OR “I don’t want my child to ever control all of the trust.” | The child’s trust is split – Trust B holds all of the assets and is controlled by a third party; Trust A holds a small portion of the assets and is controlled by the child. Trust B distributes amounts at certain stages to Trust A until it terminates. Or, Trust B never terminates and continues to hold the majority of the assets. |
| 8. “I’m concerned about large health related expenses draining the trust if my child doesn’t have health insurance.” | Allow distributions to pay for health insurance and/or do not allow distributions for health, maintenance, and support unless the child has health insurance (to incentivize obtaining insurance). |
| 9. “I can’t predict the future – will anyone be able to modify the trusts that are created after I die to account for circumstances I didn’t expect?” | Include provisions for a Trust Protector and provide the Trust Protector with trust amendment and Trustee appointment powers. |
| 10. “I want my child to have the ability to leave part of his trust to his spouse, but I still want to control what happens to those assets after the spouse dies.” | Provide the child with the ability to redirect all or a portion of the trust assets (called a power of appointment) in favor of his spouse that may only be exercised to a trust for the spouse’s benefit. The power of appointment is not effective if the child later divorces his spouse. |
We have many other creative solutions to clients’ concerns regarding their estate plan. It is our goal that every estate plan is tailored to each client’s specific needs, and that the plan is also practical and understandable. We would appreciate the opportunity to discuss any client estate planning concerns and work with you on creative and practical solutions!
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