Trusts Are Great Except When They're Not

A good legal document can do great things for you - as long as it is working properly.

It only works if it works.

I always say - as perhaps you do, too - that technology is great, except when it's awful.  It's great because it can handle in some quick and easy way a task that would previously have involved a lot of steps and legwork.  That’s possible because the device has a lot of complex wiring, and a lot of complex interaction with other devices – and when any one of those complexities fails, then the whole advantage of the technology is lost.

The same is true of many legal documents, particularly trusts.  Trusts can be used in many different ways, in many different settings, for many different goals.  But they must always have certain functions in order to achieve their purposes.

Actionable legal provisions.

The most basic function is to have actionable legal provisions.  This can get fouled up in many ways.  One is that people sometimes simply lose the document.  If no one has the paper on which the actionable legal provisions are written, then the legal provisions are not actionable.  It may sound outrageous that someone could lose an important legal document, but I try to be understanding about it – estate planning documents are intended for use far in the future, so it’s inherently difficult to keep them safe and orderly between the time you write them and the time you need to use them.  Still, you would be amazed at how many times in my career I have been approached by clients who had a trust written at some point, but now are unable to find it or to obtain any copy of it, even from the lawyer who wrote it, or from the bank or insurance company that dealt with it.

Amend with care.

Having actionable legal provisions can be more complicated than it sounds.  For one thing, legal language can leave things open ended - I worked with a trust once that allowed for a flexible number of trustees, so that when we were doing a transaction on trust property, decades after the trust was written, there was no documentation of who the current trustees were, or even of how many trustees there were supposed to be.  I’ve also reviewed trust documents that individuals amended on their own, creating language that made sense to them, but did not meld with the existing language, so that the result was a confusing, ambiguous, and unworkable mash-up.  And even when amendments are written very carefully by an attorney, they may result in a trust that spreads across several documents, one revising the other, which must be read all together, flipping back and forth between them.  When this happens, there is always a risk that there will be some conflict between the provisions of one document and another, or that one or more of the documents will be separated from the others, so that the complete sum of the trust provisions cannot be ascertained.  It’s even possible for a document to go missing and for no one to know that it was supposed to be part of the whole.  For this reason, I consider it the best practice for amendments always to be written as a complete restatement of the trust, so that there is always a single document, which supersedes the previous single document.

 Someone must be at the wheel.

 Another essential function of a trust is that a trust must have a trustee.  It’s a bit like an airplane needing a pilot.  At a minimum, it’s wise to name a co-pilot - i.e., an alternate trustee who can step in if the primary trustee dies or is otherwise unable to serve.  But it’s always possible that a successor trustee will also be unavailable or unwilling to serve, especially as they get older, and especially if the trust requires long-term administration.  If there’s no trustee serving, then it’s necessary to apply to the court to have a trustee appointed, an expensive process that can take months, at least.   For that reason, it’s wise to provide in the document for a process by which a new trustee can be appointed privately – by the beneficiaries or by a “trust protector” – without going to court.

Respect the complexity.

 So, when you use your technological devices, it’s good to appreciate the great complexity that enables them to simplify your life.  And similarly, when you get a legal document like a trust, it’s important to appreciate the complexity in its form and function that enables it to work for you.  That’s why it’s good to have a knowledgeable and experienced attorney working for you, too.