Should years in the future you need access to trust funds the trusted person might add you as a beneficiary. This creates interesting planning opportunities, but it might also create a new risk for trustees.
If you’re a trustee of an irrevocable trust, and the trust agreement is not optimal, in the past it might have been presumed that “it is what it is.” But now, do you have an obligation to use decanting to improve the provisions of the trust?
The latest salvo will be regulations negating discounts on FLPs/LLCs (perhaps only on those not operating an active business) what should you be doing? If discounts are nixed and your estate is under the federal exemption amount, you might do a happy jig! Because the IRS will have done most wealthy, but not ultra-wealthy, taxpayers a favor.
You may have created an FLP or LLC to achieve valuation discounts.
For example, one technique is to give someone a general power of appointment over a trust.
That means they will be given the right to designate who will receive the assets of the trust. While layers of limitations can be placed on such powers they do bring increased layers of complexity.
There are also a host of modifications or precautions you can consider: defer your right to receive any distributions for 10 years (the bankruptcy laws permit a trustee in bankruptcy to set aside transfers to self-settled trusts with 10 years); instead of having yourself listed as a beneficiary let a trusted person acting in a non-fiduciary capacity (i.e., not a trustee or trust protector) have the power to appoint descendants of your grandparents.
Thus, you are not a beneficiary when the trust is created, so arguably the trust is not a self-settled trust.
Other states permit self-settled-like trusts (you can set up a marital trust for your spouse and on his or her demise the assets come flow into a credit shelter trust that you are a beneficiary of).
All told there is a significant number of states that permit self-settled trusts.
Might a disgruntled beneficiary argue that merely administering the trust you have, without addressing the potential for modifying that trust, isn’t sufficient? ■ Aging: Alzheimer's affects 47 percent of those over 85. Addressing the issues of an aging are critical for many.
How will the cost and complexity of trust administration change if you as a trustee cannot assume that the governing instrument can be relied upon as the governing instrument? Taxes, while unquestionably an exciting cocktail party topic, are just not as important for many folks as more complex fuzzy personal topics.
Domestic asset protection trusts (“DAPTs”) are trusts that you set up (you’re the settlor) but you are a beneficiary of, called “self-settled” trusts.