Since trusts can be tailored to address a variety of circumstances, establishing a trust can be worth the time and effort for many families, especially when the trust agreement clearly lays out the plan for the assets placed in the trust. Establishing a trust, however, does not automatically guarantee assets will be used as intended. Then what?
Clarifying Contingency Plans
Estate planning experts point out that an overarching advantage of trusts is “having more control over assets than if you gave them to the recipient directly.” Trust agreements, for instance, can specify the age or educational attainment level required before funds are distributed. The flexibility of trusts means they can be created to address a variety of values, hopes and circumstances. Trusts can ensure eligibility for public benefits which could be critically needed as we age or decline. Trusts can offer incentives for the achievement of important educational, business or other goals important to families, and trusts can even be arranged to care for beloved pets.
Most typically, of course, trusts are set up to pass assets to designated beneficiaries, based on the trust agreement. Optimally, enough detail is included to make the intended use of assets very clear. Failure to carefully consider a variety of scenarios that could impact the trust can have unintended consequences, as attorney Rebecca MacGregor points out, via this cautionary and true “tale from the docket”:
In 1998, Elizabeth died leaving a will that contained a trust for the benefit of her niece, Jean, for her life. Upon Jean’s death, the remaining trust assets were to pass to her other niece, Dorothy … .In 2017, both Jean and Dorothy died, leaving no heirs. No other beneficiaries were named in the trust. The trust failed to state who should receive the remaining trust funds. By 2017, all of the family members in Jean’s generation and many of the family members in Jean and Dorothy’s generation were deceased, some leaving children and others not.
Fortunately, once the trustee sought legal help, Bowditch & Dewey was able to forge forward with the distribution of the assets to other living relations (aka “takers of last resort”), but only after probate proceedings had inched along over a six year period:
We filed a petition with the probate court to bring all of the accounts up to date and to determine the heirs of Elizabeth, as of 2017. After years in the probate court system, the judge determined which of the living family members were heirs, and their percentages under the intestate law. In 2023, the judge authorized the trustee to divide and distribute the remaining trust property to Elizabeth’s heirs.The legal fees, court costs, and loss of time could have been avoided by stating in the trust that in the event of a failure of all the named beneficiaries the takers of last resort would be the grantor’s heirs-at-law or charities.
The Importance of Trustees
As “Elizabeth’s case” illustrates, attention to detail is critical when trusts are established. That of course includes careful selection of a trustee to administer the trust and even a back-up plan in the form of a “successor trustee.” When choosing a trustee, it is important to consider a reliable person who deeply understands the intentions of the trust and can be counted on to administer the trust accordingly—and potentially over the course of many years or even decades. Sometimes naming a professional trustee makes a lot of sense.
Unless the assets placed in a trust are complex, financial expertise is not necessary for a trustee, but having time and being organized and diligent are. Ultimately, whether a friend, relation or professional is selected, the trustee has a fiduciary obligation to the beneficiaries—and must always exercise reasonable care and skill in managing the assets of the trust. Accordingly, the trust agreement may require a trustee bond, which is a specific type of fiduciary bond that protects the interests of the trust and its beneficiaries in accordance with applicable state law. As a leading national provider of many types of fiduciary bonds, Colonial Surety makes it easy and efficient to obtain a trustee bond. Just get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere.
Trust and Estate Law Practice?
Speed things up whenever and wherever a bond is needed. With a few clicks on The Partnership Account® for Attorneys, you’ll arm your clients with exactly the bond needed.
Just select a fiduciary or court bond from the online portfolio, send it to your client for payment, then download, e-file or print the bond. Specific obligee requirements?
Our fiduciary bond portfolio includes: administrator, estate, executor, guardian, personal representative, probate, surrogate, trustee, conservator and the list goes on. Court bonds are right here too, including: appeal, supersedeas, injunction, replevin, receiver and more.
Speedy, easy bonds court and fiduciary bonds here:
The Partnership Account® for Attorneys.
Colonial Surety is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed, and licensed for business everywhere in the USA. Our customers have awarded us a 4.8 Trustpilot score.Whenever and wherever you need a bond, trust Colonial: www.colonialsurety.com