A final column of The ethicist IN New York Times involved questions about a multimillion-dollar trust that would go to grandchildren yet to be born. The question came from an adult child whose parents were setting up the trust, with the adult child and his sibling as trustees. The trust would provide that if there are no grandchildren, the trust would be shared for charitable purposes, particularly to support disadvantaged children in the region, with the two siblings overseeing disbursements. The grown child questioned the idea of ​​leaving assets to hypothetical future descendants instead of existing family members and wondered if there was a moral dilemma because the trust encouraged siblings and their partners to have children for their own benefit. financial (perceived).

The issues raised in the column are timely and are faced by many families who are doing planning that is driven by maximizing the use of the generation transfer tax exemption, notes Patricia Angus, a family business consultant and adjunct professor at the Business School Columbia in New York City. , where he founded the Global Family Enterprise Program. She explains that because advisers to high-net-worth clients are so focused on the potential windfall of high transfer tax exemption amounts and potential increases in tax rates, they are recommending GST trusts for many of their clients. theirs. When there are no grandchildren yet, this has a strange effect on their children, who find it difficult to understand why they are being overlooked in favor of people not yet born. In these cases, the complex financial and psychological impacts on their children are being overlooked.

Communication is key

Angus says it's important for grantmakers to talk to their children about their estate plans and the impact those plans will have on the family. She notes that when her clients don't take this step, it can lead to family breakdowns and misunderstandings. In the case of the family involved in the settlement, the parents and siblings should meet to discuss the parents' goals and the siblings' roles in fulfilling those goals. If these intentions are not described in the trust, parents can write a separate letter of wishes to say how they want the trust to be used.

Donors should also define what they mean by “grandchildren.” There are so many new definitions of family and many ways to have children (for example, in vitro, adoption, stepchildren and foster children). Do parents intend to include all of these when they refer to grandchildren as beneficiaries Practitioners should carefully draft trust documents to ensure that they reflect the grantors' intent regarding whom they consider grandchildren.

Work of the Administrator

Once they have a better understanding of what donors want to achieve with the trust, trustees must understand that their job is to fulfill the donors' wishes, not their own, Angus points out. She says a trustee who is unhappy with the values ​​or goals expressed in the trust agreement may be better off not accepting trusteeship or resigning. The brothers in New York Times column seemed to believe that their values ​​should guide their role as trustees. However, they should learn more about the specific terms and purpose of the trust, as well as any restrictions that may exist on them as trustees of a trust for their children.

Angus notes that trusts, depending on the language, can provide incentives for specific behaviors of their beneficiaries. It's quite interesting, and perhaps a little amusing, to think about whether a child is given an incentive to be born just to create beneficiaries who will benefit from a trust created by their parents.