Tag Archives: Trust Protector

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Pretty young lady in her 20s with white blouse is sitting reading a book. Perhaps her parents are helping support her now. But what will happen in the future after her parents have passed away?

Will my kids be able to enjoy the same lifestyle?

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“Will my kids be able to enjoy the same lifestyle as me?” That’s a question that many people worth $10 million U.S. or less have. How do I know this? Because I’ve been an estate planning attorney since 2001. A number of my clients are worth around $10 million. If your net worth is around $10 million, you’re pretty well off. But you’re not quite well off enough to put your children in a position that they will never have to work. (This is mentioned in a 2014 article in The Telegraph.) Also, if you’re living off investments, you realize that there’s always a risk that your investments could shrink in value.

But here’s the good news. There is something you can do. At least help your kids get the most benefit from their inheritance. The fact is that most kids of wealthy families squander their inheritance. However, I do have a couple of practical suggestions for you. Now I’m not a fan of quick fixes because usually they don’t work. But here are a number of specific things you can do to help ensure that your kids will be able to enjoy a good lifestyle after you’re gone:

Don’t give the money to your kids immediately when you’re gone.

It’s so common to have a will or trust that says something like “After I have died, I want everything to go to my children equally.” This might work for a very modest estate. But if your estate is worth over $500,000 I would draft the will or trust so that your wealth remains in trust for your kids’ benefit. They can receive discretionary distributions. You will have a neutral trustee to administer the trust. The trust language will encourage your kids to continue to be productive. This will help make the money last as long as possible. WHY IS THIS IMPORTANT?  Because this is the only way to ensure that your kids don’t (a) squander their inheritance right away or (b) fight over how things are divided.

Be careful of Powers of Appointment.

One such potential landmine is what’s called a power of appointment. These are added to trusts for tax purposes. But they also allow the person with the power to change the beneficiaries. The result is it the love ones you want wanted to receive everything after you’re gone may end up getting nothing. (Obviously, your ability to help your kids enjoy the same lifestyle in the future is hampered if your wealth somehow gets transferred to someone else. You’d be surprised at how often this actually happens.) It’s probably best to have an estate planning attorney who also does probate litigation. Such an attorney is going to have a better idea of what actually works in the real world (in terms of drafting your trust and other estate plan documents).

Third, have an alternative dispute resolution provision in the trust and other documents.

Require that anyone who is to receive any benefits from the estate or trust agrees to at least attempt resolving issues without going to court. This will greatly reduce the likelihood of your loved ones having to hire attorneys to sort out legal issues after you’re gone.

Finally, make sure your trust appoints a trust protector.

his is a neutral person who can make changes as necessary. This is another way of preventing your loved ones from going to court to resolve conflicts. For example, if you choose one child to be trustee, maybe that child will make self-serving choices about dividing personal property (family heirlooms, etc.). This can cause enormous tension in the family. A trust protector can remove that child as trustee and insert a neutral trustee to dissolve the conflict.

This is just a short list of things you can do to help ensure that your kids will enjoy your same lifestyle after you’re gone. Having a neutral trustee is very important. People who suddenly come into money and up usually squandering it. There’s no perfect solution that fits every situation. But these are some steps that I have seen work time after time.

If you have any questions, call us at 602-443-4888 or email me at paul@magellanlawfirm.com.


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Widow sitting alone worried about not having Trust Protector

Every Trust Needs a Trust Protector

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I have come to the conclusion that every trust needs a Trust Protector. The reason is that you have no idea what will happen in the future. And once you are gone, there is at least a possibility that your family will fight over who gets what and how everything gets divided. It is also possible that other changes may need to be made. I discussed Trust Protectors previously here. But this is such an important topic that I wanted to share a story about why this is so important.

I recently got a phone call from a lady whose husband died a little over a year ago. They had created a joint revocable trust naming themselves as the trustees.  The value of their trust was around $3 million. They named their adult child (now disabled) as the successor trustee to take over if neither of them was able to be trustee any longer. So … when the husband died, the wife had a nervous break down. She could no longer manage her affairs. The next-in-line trustee was their child (who was also incapacitated). That meant that there was no one able to manage her finances.

Here’s what happens in a situation like this (and what happened to her). The County Attorney brought a Petition to appoint a private fiduciary company as her guardian (to make health care decisions for her). This company also became her trustee. There was litigation over whether she needed a trustee and guardian. Over the course of one and a half years, the lawyers ate up approximately $500,000!!!

Even if she is able to prove that she can now serve as trustee again, this is still set to be a problem in the future. Years from now when she is much older and perhaps develops dementia or is otherwise unable to manage her affairs, the government will again have to step in and name a new trustee. And the new trustee is almost certainly going to be a stranger!

This could have easily been avoided by naming a Trust Protector. And the future problem (which is almost certainly going to happen) could be avoided by asking the Court to amend the trust by adding Trust Protector language. Because this is so powerful, I encourage my clients to include very broad trust protector powers. (I am happy to send you my preferred trust language if you email me at paul@magellanlawfirm.com.)

You can read more about Trust Protectors in an article on Forbes.com from 2012. In the meanwhile, if you have any questions about trusts or Trust Protectors, give me a call. I’m passionate about helping families avoid (or solve) court battles and family feuds.


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Why Your Trust Needs a Trust Protector

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If you follow my blogs, you know by now that our law firm not only prepares Wills and Trusts. We also do probate litigation. This means that we go to court to handle messy family feuds over inheritances. One of the most common type of lawsuit has to do with a trustee who steals money, mismanages the investments, or for various reasons needs to be removed. A basic check and balance for a trust is to have a “Trust Protector” named who can remove an irresponsible trustee and appoint a successor. In this post, I will explain why your trust needs a Trust Protector.

That fact is that life is unpredictable. You have absolutely no guarantee that the people you named as trustee in your trust will actually do what you want. I have seen this too often. Let me give just a couple of real life examples.

Example One: Husband and wife sign a trust. They say that if husband dies, husband’s father and wife will be co-trustees. (This was a good idea at the time; it was one form of check and balance.) But, what wasn’t planned for? That husband and wife would get a divorce, husband would die shortly after that, and that the husband’s father would make off with all of the trust property, leaving the wife and kids impoverished. This could have easily been avoided if a Trust Protector had been named who could easily remove husband’s father as trustee and appoint a new truste.

Example Two: As mentioned by Jay Adkisson in a Forbes article from 2012, let’s assume that in your living trust you simply make one of your heirs/beneficiaries the Trustee. “The problem here is that you can’t predict the future. Maybe by the time you die the new Trustee has developed a drug problem, or maybe the Trustee harbored a grudge against one of the other heirs/beneficiaries and now wants them to get nothing (even though you wanted them to get their share). Without a Protector, the situation is bad. But with a Protector, the new Trustee can be fired.”

If your trust does not have a Trust Protector, I encourage you to amend it to include one. Personally, I prefer to have the protector have very broad powers, but also have a fiduciary duty. Thus, they are somewhat like a trustee, except that their powers are different from the trustee’s powers. The Trust Protector’s responsibility is to provide a check and balance to the trustee. The trustee is the active manage. The Trust Protector rarely gets involved except when needed to remove a trustee, modify the trust, or make other permissible changes.

This is not to be done by lay people. See a competent estate planning attorney.

P.S., if you are wondering what’s with the coat of arms and tartan, here’s my explanation. The Deloughery Coat of Arms shows horses, which are a symbol of loyalty. Also, there is a knight’s helmet. These are all symbols of protection and loyalty. These are good traits for a Trust Protector (and for a trustee, for that matter). The tartan in the background is the official Deloughery of Scottsdale tartan, duly registered in Scotland (which is where even Irish tartans need to be registered). I see a Trust Protector as being something like a knight … always on guard to protect the family fortune if necessary.


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