Why Are Revocable Trusts So Long?
In principle, a trust document can be as short as this:
I, Hillary, hereby create this trust as grantor and trustee. If I ever become incapacitated or upon my death, my husband, Bill, will step in as trustee. During my life the trustee may distribute principal and income to me or on my behalf as the trustee in its sole judgment determines appropriate. After my death, all of the remaining income and principal shall be distributed to my good friend, Barack. I may amend or revoke this trust at any time by delivering a writing signed by me to any trustee.
So, why are revocable trusts many pages long – sometimes dozens of pages — rather than a single paragraph? The answer has to do with all of the issues that can come up in the administration of a trust, many of which involve decisions you may need to make as the grantor, including:
- When does the successor trustee take over? When all of the original co-trustees stop serving – whether due to incapacity, death or resignation – or when one of them stops serving?
- How do you define the incapacity of a trustee?
- What can the trust invest in?
- May it pay the debts of your estate?
- If there’s an absence of trustees for any reason and you are not available, who appoints the new trustee?
- Do you want to require that new trustees have any particular qualifications?
- Do you want to give anyone else the right to remove trustees?
- What accounts or statements, if any, must the trustee provide to beneficiaries?
- Do you want distributions to be made to beneficiaries under age 18, or just made on their behalf? Would you prefer the trustee to continue managing the funds until a later age, say 25 or 30? You can also provide for partial distributions at various ages.
- What powers should the trustees have?
These and more issues need to be decided for all trusts. More complex trusts designed for tax and asset protection purposes get even longer and more complex. In addition, whenever an attorney faces an issue not covered in a trust document, she adds an applicable provision to her future trusts, and as these provisions accrete, the documents get longer and longer, even when only one trust in a 1,000 might face a particular issue again.