Creating an estate plan is without a doubt the best way to plan for the uncertainties in life, protect your assets, and provide for your loved ones. However, your estate plan should be flexible enough to be updated or revised as and when the circumstances change. Here are four useful tips to build flexibility into your estate plan.
Naming Alternate Agents and Trustees
Failing to name an alternate executor, trustee, or healthcare agent is one of the biggest estate planning mistakes you can make. For instance, let us assume that you designate your eldest son as your healthcare agent and want him to make healthcare decisions on your behalf in case you are unable to do so due to incapacitation.
What happens if you become incapacitated and if your son is unable or unwilling to act as your healthcare agent? In the absence of an alternate agent who can step into your son’s shoes and make decisions on your behalf, your family might not know what to do and make decisions that might be contrary to your wishes.
Similarly, if you fail to name an alternate successor trustee, and if the original designee is unavailable, unable, or unwilling to take control of your trust, your family members might disagree with each other on who should serve as the trustee, which in turn can lead to unnecessary litigation.
To avoid such problems, you should make sure you name alternates who can carry out your instructions if the originally chosen executor, successor trustee, or healthcare agent is unable to do so.
Granting Discretionary Powers to the Successor Trustee
Generally, a successor trustee is expected to abide by the terms of the trust you set up and follow your instructions. However, if there is a material change in the circumstances under which the trust was set up, the terms of the trust might no longer be relevant or fair to the beneficiaries.
You can preempt this problem by granting discretionary powers to your successor trustee. When the successor trustee is given discretionary powers, they can make decisions on their own depending on the circumstances and decide how the assets in your trust should be managed and how the income should be distributed.
It should be noted that granting broad discretionary powers to the trustee is a good idea only if it is someone whom you have known for a long time and can completely trust. Otherwise, it is advisable to specify the standards that the trustee should abide by and include certain restrictions that can restrict the discretionary powers of the trustee to a certain extent.
Decanting is the process of moving the assets from an irrevocable trust into a new trust. If you have set up an irrevocable trust, you can grant the trustee with the discretionary power to decant the trust if and when needed.
Normally, the terms of an irrevocable trust cannot be modified, unless the trustee approaches the court and manages to get the consent of all the beneficiaries. Needless to say, it can be a stressful and time-consuming process.
When the trustee is granted discretionary powers, they can choose to decant the trust if and when there is a material change in the circumstances and if they believe that the terms of the trust are no longer applicable or fair to the beneficiaries. In such a scenario, the trustee can move the assets into a new trust with more favorable terms – as long as the terms are not against the grantor’s intent.
Appointing a Trust Protector
A trust protector is a third party who can guide the trustee to make the right decisions regarding how the trust should be managed and how the proceeds should be distributed among the beneficiaries. They can also make modifications to the trust if and when there is a material change in the circumstances.
A trust protector also has the authority to remove the trustee and appoint a new one – if they believe that the trustee in question is not acting in the best interests of the beneficiaries or if they fail to manage the trust as per the grantor’s intent.
Looking to Create a Flexible Estate Plan? Let Our California Estate Planning Attorneys Help You!
Nobody can predict the future. But by creating a flexible estate plan that can be amended as and when needed, you can make sure your loved ones do not have to approach the court every time there is a change in circumstances.
The estate planning attorneys at Garmo & Garmo have over 80 years of combined experience and have helped thousands of clients from diverse backgrounds with their estate planning needs over the years. We can create a highly personalized, flexible estate plan which is best suited for your unique needs and goals.
To discuss your estate planning needs with a hard-working attorney from our firm, call us today at 619-441-2500 or contact us online and schedule a free consultation.