Guiding a Trustee.

You have selected a trustee to manage your trust as part of your estate plan. The trustee knows that this requires that they handle the investments, bookkeeping, and taxes. Do they also know under what circumstances money should be distributed to the beneficiaries and how much?

Many trusts leave the distribution entirely to the judgement of the trustee. There are some good reasons to not have tight restrictions in the trust. The beneficiaries’ future needs cannot all be foreseen. You don’t know just how the value of the trust will change. If the trustee must follow specific directions, the beneficiaries can embroil the trust in litigation by accusing the trustee of not following those rules. On the other hand, if distribution decisions are made by the trustee they are rarely challenged.

Usually a trustee makes decisions based on his or her own values and judgement in lieu of those of the grantor’s. This can work well as trustees are usually selected based on their judgement and knowledge of the grantor’s values. This is a risky approach though. Trustees can unexpectedly change and there are often differences in how a trustee might approach a decision versus how the grantor would have.

It is very helpful for a trustee to receive nonbinding guidance from the grantor. This can effectively be done through a letter of instruction or a statement of wishes. This will help the trustee realize the grantor’s wishes. There are many topics such a letter can address. Some examples of these are:

Should the trustee prioritize among health care, educational expenses, and the down payment on a house

How should distributions be balanced among beneficiaries

Should the beneficiaries be fully supported by the trust or should they have to work

Should the amount of distributions be limited so the trust will last the beneficiaries’ lifetime

If the distributions are to help support the beneficiaries, what kind of lifestyle should be supported

Having an understanding of the grantor’s wishes serves the grantor and the trustee well. The grantor’s wishes are much more likely to be met when expressed clearly to the trustee. The trustee has the comfort of knowing they are supporting the grantor’s values and priorities.

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Freya Allen Shoffner, Esq.
Shoffner & Associates
Counselors to Small Business and Families.

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