J. Kelly Kennedy, Attorney/CPA, PLLC

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Strategies for trust administration to avoid and settle disputes

A common concern for people in Florida is trust administration after they pass away. For people with a vast portfolio, the distribution of assets can be a major worry. Various strategies are used to try and have a handle on how the beneficiaries will receive their pieces of the estate. Using a tactic known as an incentive trust is something that is worthy of consideration if there is the possibility of disputes between the heirs and trustees.

If there are indications that the heirs are not going to use the inheritance in a preferred manner, an incentive trust can be used as a reward for behaving appropriately or punishment for misuse. This type of trust might lead to beneficiaries being upset that there are restrictions on how they use the inheritance and they will take it out on the corporate trustee who decides whether the requirements are met. In a best case scenario, the details of what entails acceptable behavior will be clearly laid out. As with anything, these can be open to different forms of interpretation. This is when it's necessary to have a trust protector.

The trust protector is someone who had a close link with the decedent. It could be a relative, a friend or business associate. This individual's role is to be a decision maker and conduit to what the decedent wanted and how it was to be interpreted. If there is a disagreement between the trustee and the beneficiary, this is a useful tool to settle the dispute without it spinning out of control. The authority of the protector will be clearly defined as per the wishes of the decedent, whatever they are.

Given the sometimes contentious nature of trust administration and how there are frequently disputes between those who are beneficiaries of that trust, it can be useful to take this type of step to try and avoid any rancor. Issues with trust can lead to long-term problems. Having legal assistance with making the decision as to how to formulate a trust can avoid them after death.

Source: Wall Street Journal, "If You Don't Trust Your Heirs...," Greg Young, Sept. 21, 2014

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