Often, clients want to continue to control their beneficiaries after death, just as they’ve done during their lifetime. They want to etch in stone the exact circumstances under which distributions should be made to the beneficiaries. Sometimes they think the beneficiary will have to go to the tombstone like a confessional or ATM.
The problem is the client doesn’t know what may happen in the intervening years. Here are just a few of the several things that regularly change after a plan has been drafted:
• Family matters frequently change between when the document is drafted and a client’s death.
• Laws often may have changed by the time of their death or the time of distribution.
• A beneficiary’s financial circumstances may have changed before the time of their future inheritance.
Rather than trying to precisely anticipate every possible future scenario, which is a fool’s errand, it’s better to put that in the hands of the trustee. The trustee can be given discretion to withhold distributions based on preset factors such as:
- The beneficiary is abusing drugs or alcohol,
- The beneficiary is susceptible to undue influence by someone,
- The beneficiary has pending marital dissolution, or
- The beneficiary has Special Needs.
That’s not to say you shouldn’t set forth your general wishes. But, most of the specifics should be left for the trustee to decide.
For example, a client in San Francisco in 1990 might have decided to provide for a beneficiary’s rent and set forth a specific dollar amount of $1,000 to cover it, expecting that would be ample. It would be much better to give the trustee discretion to pay for the beneficiary’s support, in the trustee’s discretion. Imagine how the average rents have changed over two decades in San Francisco, where the rent of even a studio apartment is now over $2400. If a specific dollar amount were used, even inflation adjusted, it would not allow the flexibility to respond to the changing world. Giving the trustee discretion achieves the desired result: to pay for the beneficiary’s rent.