Beneficiary-Controlled Trusts

Most traditional estate plans are designed to benefit and provide security to a surviving spouse for his or her lifetime and for the division of the decedent’s assets between and among the children and grandchildren.  As life expectancies.

As life expectancies have increased, we have found that at the time such divisions and distributions occur, the “children” are often in their 30s, 40s, 50s or even older. As such, in addition to other issues that should be considered regarding the ages of the children is the fact that at the time of distribution, the trust’s assets are more likely to be exposed to the claims of creditors and of estranged spouses in the context of divorce proceedings. In addition, as the children may have already amassed wealth from their own endeavors, the parents’ estates then being distributed could be subject to estate taxes not long thereafter.

It may be possible, however, to reduce or eliminate most, if not all, of these risks through the use of a beneficiary-controlled trust.  In other words, rather than providing for a division of the assets and their outright distribution to children at the death of the surviving spouse, it may be preferable from the standpoint of avoiding unnecessary risk to provide in the parents’ trust documents that the assets shall remain in trust during the child’s lifetime and for generations to follow, while allowing the child, and the beneficiaries of such child to maintain substantial control over the use and beneficial enjoyment of such assets over an extended period of time. Such a plan would allow the children to have the power to enjoy the use of the assets, without exposing them to the claims of creditors, or to dissipation in divorce proceedings, or to the imposition of additional estate taxes.  In addition, through the use of generation skipping tax exemptions, such assets can be passed down in perpetuity from generation to generation while growing at a much greater rate by reason of not being eroded through the imposition of estate taxes.

If you would like further information regarding the establishment of such a trust in your estate plan, I will be happy discuss and respond to any questions that you may have.