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November 2018
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Senior Spectrum Publications

Dead Hand Control: How Much is Too Much?
by Gerald M. Dorn, J.D., EPLS, AEP
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Gerald Dorn
Gerald Dorn

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:

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.

The trustee selected by the client is in a much better position to judge when a distribution should be made, for rent in the prior example. The first five letters say exactly what you should do with them: trust them. Trust that the trustee will make the right decision. If you don’t trust that person, put someone in that role whom you do trust.

The client can only gaze into a crystal ball and wonder what might happen in the world and in the beneficiary’s life. Trustees have the benefit of 20/20 hindsight. They know what has happened since the client drafted their estate plan and died. They know the beneficiary’s circumstances and they know the current state of the world. They are in a far better position to make a decision.

Gerald M. Dorn has been practicing estate planning law for 23 years and is the managing shareholder of the law firm. Mr. Dorn is a Certified Specialist in Estate Planning Law and an Accredited Estate Planner by the National Association of Estate Planning Councils. He has been awarded the designation of Academy Fellow from the American Academy of Estate Planning Attorneys.

 

The law firm of Anderson, Dorn & Rader, Ltd. is devoted exclusively to estate planning and estate and trust administration. The attorneys at Anderson, Dorn & Rader, Ltd. offer guidance and advice to clients in every area of estate planning and estate and trust administration. For more information, or to attend a seminar, please contact us at (775) 823-WILL (9455) or visit us online at www.wealthcounselors.com.