Cultivating Humanity in Trusts

How Preparedness Helps Families Flourish in a Complex Trust Landscape

Most people have the structures of estate planning in place – trusts, wills, powers of attorney. Prepared estate planning requires us to look beyond the four corners of the documents and includes an understanding of the why behind the planning and the outcomes that can be expected. Countless families have broken apart over the division of family wealth and treasures. This is almost always avoidable if we have the courage and compassion to address issues honestly and with listening and empathy. Even the most complex estates can be managed in a way that promotes family harmony for the long term. The ultimate success is when a family can celebrate and grieve their loved one knowing that they don’t have to worry about the transition of family wealth.

Trust breakdowns rarely come out of nowhere. In many cases, early signals – such as unclear expectations or lack of shared understanding around distributions – are present well before the administration begins. When these issues go unaddressed, families may fill the blanks themselves, creating a strain where none needs to exist. Addressing these issues in advance can strengthen relationships – and even be a source of joy.

Many times, the structure of a trust will treat children or grandchildren differently. It may be that the distributions are unequal or that one beneficiary’s share will be held in trust rather than distributed outright. This may be because of special needs, concerns about substance abuse or mental health, or spendthrift behaviors. People create trust structures to address these issues, but they don’t have the conversation with the children as to the why.

A specific example would be Child A is able to manage money and will receive their share outright. Child B should not have access to funds directly and their share will be held in trust. This is the correct decision from a structure standpoint. However, if at the parent’s passing this is a surprise to Child B, they will construct a narrative to explain it, likely that the parent loved Child A more. This can be avoided by the parent having a loving, clear conversation with Child B about why they are being treated differently from their sibling.

Planning for blended families is also fraught with potential disaster. There is often a desire by the grantor for everyone to continue to get along after their passing; however, this may not be reality. Attempting to force children to work with a step-parent or step-siblings is typically unsuccessful. Common mistakes include making children trustees over their step-parent, or making siblings who don’t get along co-trustees. These are control issues. We should not put people in control of money for the benefit of an individual they don’t get along with. Funds should either be managed by a disinterested trustee or distributed outright so that the funds are separated thus eliminating anything to argue over. Even when people get along, the shift in power by giving one person control may lead to new problems.

The family cottage is another example of potential disaster. The family cottage has great sentimental value because of shared memories but retaining it may not be feasible. Is there also enough money to maintain it? Can each child contribute equally? Do children (and their spouses) get along? It is important to have a realistic conversation about what may happen and what the potential pitfalls are and make the decisions based on the evidence. If there is not a way to fund the cottage over the long-term, selling a sentimental asset but preserving long-term relationships may be the better route.

Another common set of problems involves fully completing, updating and managing the assets themselves. Are the beneficiary designations up-to-date and do they include contingent beneficiaries? Is the home really in the trust and have we verified that information? Can the assets actually be divided the way that we want? Some oil and mineral interests and closely-held assets are very difficult to divide. Do we understand any private alternatives or other illiquid investments and can we pay all of the bills and care for family members if they cannot be liquidated? If we do not verify these items, we may end up in the probate court in spite of the planning, or we may frustrate the estate planning entirely.

The best estate planning doesn’t end with the signing of the documents, but also includes honest, candid reflection and conversation about why the decisions were made, being realistic about the individuals involved and follow up on all of the details to make sure that everything truly is in order. No one likes to talk about these things – they are hard. But these courageous conversations result in better outcomes and less family strife. Your team at Greenleaf Trust looks forward to having these conversations with you.