Things to Think About When Designing a Trust for a Beneficiary After Your Death, Part III
As stated in my last few blogs, there are certain things you should think about when designing a trust for a beneficiary. Also remember, this list takes a very conservative approach and can be modified according to specific state law. The list continues as follows:
7) Consider selecting a state to settle the trust or move the location of the trust to a jurisdiction with more debtor friendly laws to maximize the protection of the corpus from the claims of potential creditors of a beneficiary. Some states are much friendlier than others.
8) Avoid giving a beneficiary the authority to remove and replace any trustee because a court may view it as placing with the beneficiary ultimate control over the trust.
9) Give the trustee the authority to distribute income or principal to multiple current beneficiaries rather than a single current beneficiary. This can easily be done by including the children of the beneficiary you intend to be the main beneficiary.
10) Consider including provisions that might automatically eliminate or suspend a beneficiary’s interest in the trust or give an independent trustee the authority to eliminate or suspend a beneficiary’s interest in the trust. This is commonly done with divorce provisions to cut-off an in-law upon divorce.
11) Consider limiting the beneficiary’s access to all or a portion of the trust for the term of the trust or a lesser period. You may want to limit distributions to income until age 65 to allow the principal to be there for your beneficiary’s retirement.
12) Consider giving an independent trustee the power to distribute the assets of the trust to the trustee of another trust.
And a bonus consideration: Do not permit a beneficiary to assign any part of all of his or her beneficial interest in a trust to anyone, not even a limited class of individuals such as a beneficiary’s descendants.
To discuss your current estate plan, please consult with an estate planning attorney.
