A common concern for those looking to set up a trust or foundation is who will control it after their death. Poor planning can lead to trust or foundation assets being managed or distributed against the settler’s wishes. Thankfully, there’s a lot of flexibility in planning who will control your trust or foundation after your death.
Private Trust Companies (PTCs) commonly serve as trustees for HNWIs and their families. PTCs create a lot of flexibility in planning the future control of your trust.
Because a PTC is a legally distinct entity, its ownership interests must be accounted for over time. This is true regardless of whether you own the PTC personally or if it is owned by a purpose trust or purpose foundation.
Personally holding the PTC ownership interests causes them to transfer to your heirs upon your death. This is often undesirable because heirs may infight about how the trust operates and sometimes elect the wrong people to the PTC board.
It’s best to address the method for determining the PTC’s board, which may be comprised of:
- Trusted advisors
- Professional trustees
… or any combination you desire.
Determining the board is often done by shareholder voting. Or board members can vote to fill any vacancies. Beneficiaries may be allowed to vote for PTC board members. The trust’s protector may also be given voting power. Alternatively, board member’s may be given the authority to name their own replacement.
Many settlors elect a professional trustee to control their trust after their death. This option streamlines long-term planning because most professional trustees operate as a company which exists in perpetuity – it’s possible that no changes are necessary for many generations.
However, due diligence requirements makes the process for getting onboarded with a professional trustee company rather time consuming and labor intensive. If you plan on having a professional trustee manage your trust after your death, it is best to get onboarded with them beforehand.
An often overlooked strategy for influencing your trust after your death is a Letter of Wishes – a non-binding document detailing your preferences such as how children are to be treated (equally or by need), your investment strategy, etc.
It’s my job as an advisor to take a client’s preferences and use my knowledge and experience to come up with a trust or foundation that:
- best protects against attacks, while also
- providing for flexibility in the future to make changes as needed
- will carryout my client’s wishes during their lifetime as well as after their death
In my latest video, I discuss some of the many variables that must be considered when designing a custom trust or foundation.