Trusts for Children, Grandchildren and Beneficiaries
A meeting with children or other beneficiaries, even if by conference call, should be part of a well-conceived estate plan. Such a meeting represents the first stage of lifetime education.
The concept of a "convenience" trust for children, grandchildren, or other beneficiaries can best be described as providing a shell of protection for those beneficiaries while at the same time allowing them to be trustee of their own trust. Letters of intent (your instructions to your trustee concerning the beneficiary) can be an integral part of your planning even where the beneficiary is the trustee of their own trust (i.e. a "convenience" trust for children, grandchildren, or other beneficiaries - a shell of protection for the beneficiary while at the same time allowing them to control their own trust as trustee).In further trust planning for children, grandchildren, or other beneficiaries, proper trustee selection is critical as beneficiaries can and oftentimes do exert enormous pressure on the trustee, potentially putting the purpose and intent of the trust planning in jeopardy.
Ask, "How qualified is your trustee to serve as such? Are they financially astute, of impeccable character, healthy, and mentally and emotionally "rock solid"? They should be. The shares of children, grandchildren, or any other beneficiary, can be left to them outright or in further trust. If you knew that your beneficiary's outright share could be lost due to a bad marriage, law suits or other creditors, bankruptcy, poor judgment, inexperience, or other hazards, why would you ever leave funds to a beneficiary outright and free of trust?
Trustees are subject to liability in their fiduciary role. Because of this fact, many potential trustees are reluctant to serve. This should be an important consideration in trustee selection to prevent, to the extent possible, the trustee's later refusal to serve. Your trustee should not be an ostrich. He or she (or institutional fiduciary) should be an eagle.
Education trusts for grandchildren are very popular and can be customized to accomplish the objectives of grandparents. Talk to your estate planning attorney about this rewarding and happy aspect of planning.
Authored by: Stephen R. Elville, J.D., LL.M., Elville and Associates, steve@elvilleassociates.com, 443-393-7696