I Have A Trust?

Irrevocable trusts that defer distributions to beneficiaries are commonly used to minimize estate taxes and avoid legal and financial risks. Deferring these distributions to beneficiaries has both advantages and drawbacks. Many settlors do not want beneficiaries to know about of the existence of the trust until some set age or life achievement is reached. The beneficiary may still be financially immature or suffering from addiction. The ability of the settlor to limit information regarding a trust varies by state. It is important to speak to advisors about statutory requirements for divulging trust information. Telling a young beneficiary that they will be inheriting millions of dollars may serve as an impetus for apathy.

A drawback to withholding information from beneficiaries, if allowed by state law, is the lack of notice that occurs when a trustee is shirking their fiduciary duty. A trustee using trust funds for personal gain may so do relatively unencumbered if no annual statement is being sent to beneficiaries. Trust drafting and estate planning can be an extremely complicated endeavor. Addressing the client’s trust disclosure expectations in the trust document and developing a plan to fully prepare the beneficiaries to receive the wealth will help balance the scales and may aid in avoiding many perils.

See Scott Mahon, I Have A Trust?, Financial Advisor, June 22, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.