Trust fund kid stories make great copy on TMZ and examples in estate planning law school courses. Is it the fault of the beneficiary, trustee or grantor (deceased parent or grandparent) when they fail?
Actually, our research shows the problem lies with the grantors. These parents and grandparents had the best of intentions. They worked hard. They had great successes. They just assumed that their values of hard work and responsibility -- and the rate of spending -- will be the same across future generations.
Thinking ahead about the type and quantity of trust distributions your trustee will disburse to your beneficiaries is the first important step of trust distribution. Having some plan is better than having no plan, and heavy tax burdens and lackluster heirs further complicate the game plan.
Unfortunately parents and grandparents overestimate their heirs ability and desire to manage money. The fault lies with the parents and grandparents.
The beneficiaries of this wealth were not informed or educated. Nobody had frank talks on the amount, the responsibility and the pitfalls of wealth.
"Smart trust distribution(s) over generations is not guaranteed." This adage roots comes from hard realities. One study found that for families with assets of at least $3 million, 70 percent survived the second generation. The same study showed 90% of the third generation lose it all. Parents or grandparents who openly talk about their money and wealth philosophy to future heirs avoid repeating these hard lessons of history.
To make matters more complicated, most corporate trustees are unfamiliar with family situations. Adding to this problem, most individual trustees are not trained in how to properly determine trust distributions via the rules of the trust document.
How can a family attempt to make future trust distributions when they are no longer living, be a support and not an enabler for future generations? The famous Biltmore Estate in North Carolina has sustained asset transfers now into the fourth generation and is able to stay open to the public because of shrewd pre-planning. Though the latest Biltmore transfer happened in 2017, the family began planning for it in 1978.
“Almost everything we did had an undertone or a consideration for making sure that when the eventual transfer happened, that we would be intact and everything would be fine.”
Proper wealth management requires a trustee to consider the grantor’s written wishes during trust distribution and asset management. Cooperative beneficiaries that share the grantor’s vision of maturely handling the trust distribution are vital to successful long-term wealth transfers. Click here to read more...
