Aligning Priorities

When creating a trust, some thought must be given to expressing the grantor’s wishes in writing. This precatory language is nonbinding language in a trust agreement stating preferences or purposes of a trust to help guide the trustee in making decisions.

This may include:

  • Primary purpose for creating the trust
  • A statement of distribution preference
  • A statement of beneficiary preference

They can also permit greater beneficiary control and involvement:

  • The beneficiary can have control over the trustee identity. If it isn’t appropriate for the beneficiary to become a trustee, the beneficiary should at some point have the power to remove and replace the trustee.
  • The beneficiary should be entitled to have as much knowledge about trustee decisions as possible.

The family conundrum – In many states, trust assets become “marital” assets.  This can create tension that, at a minimum, you should discuss thoroughly with your legal adviser.  One possible approach might be to require that a beneficiary, before getting married, enter into a premarital agreement as a prerequisite to receiving trust distributions.  It may also make sense that legal fees for setting up such an agreement be paid from trust assets.