The layers of successful trust planning

Regardless of the intended purpose, the process of completing and implementing a trust involves layers of planning and analysis. This article touches on two of those layers.

Before beginning the process of drafting a trust instrument, you have to know the client and family. What are the family dynamics? Are there dependency issues with any beneficiary (or your client)? Is there a special needs beneficiary or a beneficiary who just can’t manage money? What are the estrangements? This can be an awkward discussion which addresses sensitive topics. I have few multimedia skills (actually none). If I did, I would be tempted to draw upon the old Schoolhouse Rock concept to develop an episode of “Dysfunction Junction” to initiate this discussion.

How will trust assets be used for beneficiaries prior to distribution? If this is a trust to be managed while beneficiaries are younger, is there a standard outlined for possible distributions? Can the trustee distribute assets for a beneficiary’s health, education, maintenance and support? If assets are not to be distributed outright to a beneficiary until age 35, should you make a specific provision allowing the trustee to make distributions before that time for a child’s wedding or for a down payment for the purchase of a home?

Even if there is no special needs beneficiary at the time the document is executed, there should be provisions that provide for the authority to create and fund a special needs trust, in the event a beneficiary is a special needs beneficiary at the time of distribution. A special needs trust ensures the beneficiary continues to receive public benefits and the trust fund will be able to supplement those benefits.

As part of this process, it is critical to coordinate beneficiary designations for life insurance, IRAs, etc. with the trust’s goals. The flexibility and effectiveness of trusts as estate planning vehicles make them attractive options for any client willing to invest the time and money to create and maintain a trust suited to his or her purposes and situation.

Attorney Terry L. Campbell is the managing shareholder at Moertl, Wilkins & Campbell, S.C. in Milwaukee.

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