Probate & Trust Law Section Conference Manual ... - Minnesota CLE

Failing to do so may lead to resentment among beneficiaries, where one or more
beneficiary feels they are not being treated equally or fairly in relation to the others.
Alternatively, residual or remainder beneficiaries may feel that their interests are not
being protected and may question distributions to current beneficiaries or investment
decisions that appear to favor the short-term rather than the long-term. Failure to
adequately address these concerns in the estate planning process can lead to family
dysfunction, disputes and even outright litigation.
Another common source of disputes involves “special assets.” While each family’s
situation is unique and may have its own “special assets”, a couple of the more
common ones include family businesses or specific real estate, like cabins and
vacation homes. Family businesses require special planning specifically around
succession issues. Questions like who will own the business, who will run the business,
and who will benefit from the success of the business are critical, as the answers may
be different for each question. Will the business be able to generate enough income to
not only support itself but also the lifestyle and financial needs of those who will benefit
from it? Planning is crucial not only to avoid potential disputes, but to guarantee the
sustainability and success of the business.
Cabins, vacation homes and family “compounds” also require specific planning.
Maintenance and upkeep, management, time and use allocation, expense sharing and
buy-sell provisions are just some of the many issues that should be addressed early in
the planning process. Trusts are often used as the entity that holds these assets for the
common use and benefit of the beneficiaries, but often the specific day-to-day
management and operational issues are set forth in a separate management
agreement, allowing for easier amendment and reformation if necessary in the future.
Education--The Critical Component
For professional advisers working with parties to a trust, whether it be representing the
grantor, the trustee or the beneficiaries, taking time to explain and educate the parties is
crucial to the success of any working arrangement. Investing in education time upfront
can ensure that all the parties are not only informed and knowledgeable, but also
engaged and held accountable. The specific educational content may vary depending
upon what party to the trust the advisor is representing.
For the grantor: Has the grantor fully and completely disclosed his or her objectives?
Does the advisor have a clear understanding of the grantor’s intent in establishing the
trust? Will the trust meet the family’s unique and often complex needs? Does the
grantor fully understand the role of the trustee and what is required of that person? Has
the advisor discussed with the grantor the different types of trustees (i.e., individual,
professional, private trust companies or some combination thereof) and the advantages
and disadvantages associated with each of them? Poor trustee selection is a precursor
to trust disputes, many of which may have been avoided or minimized if greater care
had been exercised initially in the nomination and appointment of the trustees.
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