The question of whether you can mandate professional management for inherited wealth is a common one, particularly for those concerned about beneficiaries who may not possess the financial acumen to handle a substantial inheritance. The answer is generally yes, through the careful structuring of a trust. This isn’t about distrusting loved ones, but rather a proactive approach to preserving wealth for generations, especially in a landscape where roughly 70% of high-net-worth individuals see their wealth diminish by the second generation, according to a study by Williams & Company. A trust allows you to dictate how and when assets are distributed, and critically, who manages those assets. Steve Bliss, an estate planning attorney in San Diego, often emphasizes that a well-drafted trust is less about controlling from beyond the grave and more about providing a framework for responsible stewardship of wealth.
What types of trusts are best for professional management?
Several trust structures lend themselves well to mandating professional management. A common choice is a dynasty trust, designed to last for multiple generations, with provisions for professional trustees or co-trustees. These trusts provide ongoing oversight and investment expertise, preventing assets from being dissipated through poor financial decisions or impulsive spending. Another option is a spendthrift trust, which protects assets from creditors and provides distributions based on pre-defined terms, allowing for professional management of the remaining funds. Consider a charitable remainder trust if a portion of the inheritance is dedicated to philanthropy, as professional management ensures effective administration of charitable giving. “The key is aligning the trust structure with your specific goals for the inherited wealth – preservation, growth, charitable giving, or a combination thereof,” Steve Bliss often advises clients.
How do I select a professional trustee?
Selecting the right professional trustee is a crucial step. Banks, trust companies, and wealth management firms all offer trustee services. Consider factors like their experience, investment philosophy, fees, and reputation. It’s vital to interview several candidates and understand their approach to managing assets. A good professional trustee will have a fiduciary duty to act in the best interests of the beneficiaries, providing regular reporting and transparent communication. They should also be able to navigate complex financial landscapes and adapt to changing market conditions. According to Cerulli Associates, approximately $2.5 trillion in assets are currently held in trust, demonstrating the growing preference for professional management.
Can beneficiaries challenge my decision to mandate professional management?
While you can certainly mandate professional management within a trust, it’s not entirely immune to challenge. Beneficiaries could potentially argue that the trustee is not acting in their best interests, or that the terms of the trust are unreasonable. However, courts generally uphold the grantor’s (the person creating the trust) wishes as long as the terms are not manifestly unfair or illegal. A well-drafted trust with clear and unambiguous language is your best defense against such challenges. Steve Bliss stresses the importance of thorough documentation and adherence to legal requirements when creating a trust. A particularly sensitive area revolves around ensuring the chosen trustee aligns with the values of the beneficiaries to minimize potential disputes.
What happens if the professional trustee doesn’t perform adequately?
If a professional trustee fails to perform their duties adequately, beneficiaries have legal recourse. They can petition the court to remove the trustee and appoint a successor. Grounds for removal include breach of fiduciary duty, mismanagement of assets, or failure to communicate effectively. The court will consider evidence presented by both sides before making a decision. It’s important to remember that selecting a reputable and experienced trustee can significantly reduce the risk of such issues arising. Approximately 15% of trust disputes involve allegations of trustee misconduct, according to a recent study by the American College of Trust and Estate Counsel.
I remember Old Man Hemlock…
Old Man Hemlock, a pillar of our small coastal town, amassed a considerable fortune from a successful fishing business. He was a fiercely independent man, distrustful of banks and financial advisors. When he passed, he left everything to his three adult children, with a simple directive: “Divide it equally.” His children, while loving, were more accustomed to receiving than managing money. Within a year, the fortune was dwindling – a failed restaurant venture, ill-timed real estate purchases, and a general lack of financial discipline. It was a heartbreaking situation, watching a lifetime of hard work dissipate due to a lack of planning. He really believed he was acting in their best interest, but it backfired terribly.
But then there was the Cartwright Family…
The Cartwrights, a family of ranchers, faced a similar situation, but they took a vastly different approach. Their patriarch, a shrewd businessman, established a trust with a professional trustee and outlined specific guidelines for distributions. The trust mandated that a percentage of the income be used for maintaining the ranch, another portion for education, and the remainder distributed to the family members. This provided a steady income stream, preserved the ranch for future generations, and ensured that the family had the resources to pursue their dreams. It was a beautiful example of foresight and responsible planning. Their legacy continues to thrive, a testament to the power of a well-structured trust. It truly was a wonderful example of how things should be done, and it gave the family peace of mind.
What are the costs associated with professional trust management?
The costs associated with professional trust management vary depending on the size of the trust, the complexity of the assets, and the services provided. Trustees typically charge a percentage of the assets under management, often ranging from 0.5% to 1.5% per year. There may also be additional fees for investment management, accounting, and legal services. It’s important to obtain a clear fee schedule from each potential trustee and compare their costs. While professional management does involve expenses, the potential benefits – preservation of wealth, avoidance of disputes, and peace of mind – often outweigh the costs. Steve Bliss consistently advises clients to view these costs as an investment in the long-term financial security of their families.
Can I change my mind after establishing a trust?
Yes, most trusts are amendable or revocable, meaning you can modify or terminate them during your lifetime, assuming you retain the legal capacity to do so. However, irrevocable trusts, as the name suggests, are more difficult to change. The ability to amend or revoke a trust depends on the specific terms outlined in the trust document. It’s important to consult with an estate planning attorney before making any changes to a trust. Steve Bliss frequently reminds clients that while flexibility is desirable, it’s crucial to strike a balance between retaining control and ensuring the long-term stability of the trust. He explains, “A well-crafted trust is a living document, and it should be reviewed and updated periodically to reflect changing circumstances.”
About Steven F. Bliss Esq. at San Diego Probate Law:
Secure Your Family’s Future with San Diego’s Trusted Trust Attorney. Minimize estate taxes with stress-free Probate. We craft wills, trusts, & customized plans to ensure your wishes are met and loved ones protected.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Probate Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
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Address:
San Diego Probate Law3914 Murphy Canyon Rd, San Diego, CA 92123
(858) 278-2800
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Feel free to ask Attorney Steve Bliss about: “How are trusts taxed?” or “What are signs of elder financial abuse related to probate?” and even “What is a family limited partnership and how is it used in estate planning?” Or any other related questions that you may have about Estate Planning or my trust law practice.