- Everyone needs an estate plan—even people who do not have a lot of money.
- Estate plans help give people peace of mind. They also help avoid bad feelings and disputes between beneficiaries.
- Trust protectors are a recent innovation in estate planning. When someone is appointed as a trust protector, they can change some of the terms of a trust for certain purposes, after someone has died—often to remove and appoint trustees, or to adjust terms around changing laws or for tax purposes.
You absolutely still need an estate plan, even if you don’t have a lot of money. To elaborate on this point, I would like to pose a question:
What does estate planning do for us?
As a person who creates estate plans, I can tell you that one major thing that estate plans do is to give people peace of mind. Estate plans allow people to create a plan where their assets go to the person or persons that they want them to go to in the manner in which they want them to go to them. By that I mean either outright, or in some sort of sub-trust over a period of time that enhances the beneficiary’s life and doesn’t create an incentive not to work anymore.
The second most important thing that an estate plan does is it avoids bad feelings and disputes. If you do not clarify the specifics of how you want your assets to be distributed and to whom you want them to go to, it is my experience that you will absolutely have disputes among the beneficiaries about the assets. I can virtually guarantee it.
By having an estate plan that includes a specifically drafted trust directing how your assets will be distributed to your beneficiaries, you have a very important first step toward those beneficiaries (often siblings or family members) avoiding ruptures in their relationships with one another. It’s one of the best ways to increase the odds that your children will continuing to speak to each other after your death.
People often think that their family would never fight over money or inheritance, but I always repeat three crucial words that are essential to remember in the business of estate planning: money changes everything.
I am especially fond of this phrase because it works for all sides of this issue. Sometimes, money changes everything in a good way. The amount of money contained in an inheritance might give the beneficiary the opportunity to buy a house or pay off debt, or to put a child through college.
However, the axiom is equally if not more true on the other side, the darker side. Money does change everything, and sometimes that includes relationships among siblings. It is my experience that relationships that weren’t very strong before don’t tend to get stronger when money issues are involved—and some very strong relationships are tested, and fail, because of money.
This is why it’s so important to create a plan, and to have a strong trustee in place to enforce or properly execute the plan. This way, you reduce the chances of money causing poor relations among the beneficiaries.
On this topic, I would also like to talk about one other concept that is relatively new in the estate planning realm—probably becoming a major theme within the past five years or so. This is the concept of a trust protector.
A trust protector is typically an attorney or other qualified professional who has the ability, once a person dies and their estate plan becomes irrevocable, to change the terms of the trust. This means that they can replace trustees and adjust other elements of the trust, especially to maximize tax benefits. They cannot eliminate beneficiaries or change gifts, but have the power to amend in the trust in many ways for the benefit of the beneficiaries.
The concept of a trust protector has passed muster with the Internal Revenue Service, and therefore is widely considered valid. Trust protectors have the same fiduciary duty as trustees. I often opt to appoint a trust protector for complicated trusts or trusts with large sums of money. I especially include trust protectors on special needs trusts, so that I can accommodate the particular laws surrounding benefits, or any change in those laws.
As aforementioned, trust protectors also have the unique ability to remove trustees, which might be desired by the trustee themselves, especially if they have become frustrated with constantly being harassed by the beneficiaries about the job they’re doing. The trust protector gives that person an opportunity to resign, and can appoint a new trustee in their place.
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