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

V. Planning Techniques.
Trusts are probably the most familiar vehicle that estate planners use
to influence the behavior of beneficiaries. Trusts are established to hold property
that our clients do not want to transfer outright to a beneficiary.
A. Qualified Minors Trusts/Crummey Trusts. A qualified minor’s (§
2503(c)) Trust allows a client to provide specific instructions to the trustee
regarding the use of principal and income. Although actual distributions can
be left to the discretion of a trustee, it is important that no substantial
restrictions be imposed upon the discretion of the trustee if the client desires
to take advantage of annual gift tax exclusions. These trusts are not
considered to be the best vehicles for incentive purposes as the beneficiary
receives the trust assets when reaching age 21. Some practitioners try to
circumvent this particular problem by providing the beneficiary with the right
at age 21 to compel distribution of the trust principal but limiting that right
to a specific period of time. Even though a § 2503(c) Trust of this nature
may continue until the beneficiary attains a specified age, clients generally
prefer not to use this type of a trust because of the beneficiary’s right to
withdraw trust principal at age 21. Some states allow a § 2503 Trust to
be extended. Due to this particular uncertainty, clients generally prefer the
use of discretionary trusts with Crummey provisions. The use of these
trusts beginning when beneficiaries are very young will generally provide a
client with some assurance that the power of withdrawal will not likely be
exercised. Crummey trusts most certainly can include typical or not so
typical incentive provisions and may continue until the expiration of the
applicable perpetuities period.
B. Trusts for UTMA Accounts. Some clients who have established
UTMA accounts for children and grandchildren become quite concerned as
the child or grandchild turns 18. Clients have three choices. First, the “head
in the sand” approach requires a client to avoid mentioning anything to the
child or grandchild about the UTMA account. The head only pops out of the
sand if and when the bank or brokerage company makes inquiry regarding
authorization for investment of UTMA account assets. Second, the grantor
can quietly advise the beneficiary (or the beneficiary’s parent(s)) that the
minor will own the UTMA account at age 18, but still make arrangements for
the continued management of the account assets through a power of
attorney. The child or grandchild usually senses the need to permit the
parent or grandparent to continue to manage the account. A grab and run
tactic implemented by the child or grandchild would only serve to dissuade
the parent or grandparent from making future gifts and bequests. The third
option involves the encouragement of the minor to establish a grantor trust
for the UTMA account assets. This trust could continue until any specified
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