In gymnastics, flexibility is key. Athletes train their bodies to stretch and adjust to changing speed and movement with total control and grace. Gold medal estate planning, in many ways, is no different.

Irrevocable Trusts

Over the past several decades, the use of irrevocable trusts for estate planning has become increasingly common. Not long ago, families were content to allow outright distributions to children and other heirs at ages just beyond the age of majority, such as age 21. Today, it is not uncommon for parents to hold children and grandchildren shares in irrevocable trusts until age 30 or 35, or perhaps even longer.

These longer-term trusts also allow for extended periods of financial discipline to develop by heirs, or for marriages to become more settled and secure. In some cases, and for good reason, shares are kept in trust for heirs for their entire lifetime, perhaps with tax and asset protection planning as the primary estate planning goal.

Not only are individuals turning to irrevocable trusts for longer periods of time, but also more families are using irrevocable trusts for lifetime giving, or for special circumstances due to a disability or personal challenge. These irrevocable trusts, known as special or supplemental needs trusts, are often strictly required to protect a beneficiary’s qualification for Federal or State benefit programs. Simple irrevocable trusts are also increasingly used as lifetime gift trusts to remove otherwise taxable assets from one’s taxable estate.

Since by their nature irrevocable trusts cannot be revoked, nor amended by the grantor, these trusts lack the flexibility to complete much more than a forward roll. This is where the implementation of Trust Protectors in your estate plan can score high marks.

Trust Protectors

Trust Protectors are individuals designated within an otherwise irrevocable trust to provide oversight in decision making, and to provide specific flexibility to adjust to changing circumstances.

These fiduciaries can be given broad authority to carry out enumerated and strategic purposes that cannot be reserved to a trustee, settlor, or beneficiary. Simply stated, Trust Protectors can amend an otherwise unamendable document.

Trust document flexibility is more important now than ever before. Increasingly, irrevocable trusts need to be amended to take advantage of new trust administration or tax principles, to change the trust’s situs or “home” to a more favorable income tax state, or to change the trust’s distribution timing or standard. Trust Protectors can also help manage the liquidation of business interests or unique assets like a family farm or vacation property. In these cases, they may even be given the authority to veto or approve the sale of specific assets.

Trust Protectors can also be referees allowing for trust interpretation short of court involvement, and can be used to approve trustee accountings and compensation. Better yet, you can name multiple Trust Protectors, similar to guardians for minor children, who are given authority to serve in succession if the previous named Trust Protector is unable or unwilling to serve. Trust Protectors can be thought of as the trusted advisor who can provide the “heart” of a champion to an otherwise rigid document, often being administered by a stern and uncompromising corporate trustee.

The next time you see your estate planning attorney, be sure to avoid a blind landing with extra steps resulting in a deduction in artistic points. Include provisions for a Trust Protector, and your estate plan can bring home the gold!

This material is for general educational purposes only and is not intended as personalized investment, legal, or tax advice. Savant is neither a law firm, nor a certified public accounting firm, and no portion of its services should be construed as legal or accounting advice.

Author Michael T. Cyrs Senior Director of Wealth Transfer

Mike has nearly 30 years' experience as a private attorney and senior wealth transfer advisor concentrating in complex estate and business succession planning matters; estate, gift and generation skipping taxation; and advising clients regarding administration of highly taxable estates and trusts.

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