Trusts can be very powerful tools to transfer and protect family wealth for future generations. However, frequently families wind up becoming unhappy with their trusts because it’s the wrong solution, according to a recent article from Forbes, “Why You Might Need To Fix Your Family Trusts.”
There are several reasons why this happens. They include:
- Poor Set-up. The trust wasn’t created properly, and the lawyer drafting the trust didn’t truly understand the wishes of the family;
- Poor Writing. The language in the trust is inappropriate or too vague, which can cause issues; and
- Poor Planning. The trust isn’t viable anymore because situations change, and the document wasn’t created in a way to adapt to a shifting environment.
The law is constantly changing. As a result, there are new legal strategies and structures that are better for some situations than a trust. An experienced trust attorney should be consulted about all of the options for your situation.
For any family, there’s bound to be specific reasons why they need to fix their trusts.
Most problems, however, can be categorized in three areas:
- The trust doesn’t have provisions to provide necessary distributions to family members;
- The governance structure or rules of the trust may not provide for effective management or sufficient oversight; and
- The trust is tax inefficient.
When any of these situations occurs, there are ways to make sure the trusts work along with the needs and wants of the family. A trust that has any of these issues won’t be effective. The trust must be fixed or replaced to achieve the family’s goals.
It’s wise to periodically review trusts to be certain that they’re satisfying the intended objectives and taking advantage of all of the possible benefits. A trust attorney may be able to make some adjustments that are significantly advantageous to the family.
If a family has questions about the efficacy of their trusts, they should review them with one of our experienced estate planning attorneys. It’s important to examine the trust with a sound understanding of the needs, desires and preferences of the family.