For Estate Attorneys, Trust Officers, and Financial Advisors
Managing client portfolios often involves navigating the intricate landscape of trusts. It’s not uncommon to encounter clients who, for various reasons, have accumulated multiple irrevocable trusts over the years. This can lead to administrative burdens, increased costs, and unnecessary complexity.
At Legacy Home Concierge, we understand the challenges this presents. While we focus on the practical, day-to-day management of properties and estates, we recognize that a streamlined trust structure can significantly simplify the lives of fiduciaries and beneficiaries alike.
A recent discussion from Welcome to Talking T&E for Advisors, featuring Susan Lipp, Editor in Chief of Trusts & Estates, and Jamie Hopkins, Chief Wealth Officer at Bryn Mawr Trust, sheds valuable light on when and why merging irrevocable trusts might be a prudent strategy. This conversation offers critical insights for professionals advising clients with complex trust situations.
The Multi-Trust Dilemma: Where Do You Start?
As Jamie Hopkins aptly points out, “Advisors often end up as the ones managing multiple trusts.” This often stems from clients working with different estate planners in different states over time, leading to “essentially duplicate trust work.”
When faced with a client holding four or more trusts, the initial question is always: “Where do we begin?”
One option, as Hopkins notes, is simply to “leave it be.” If the costs and complexities of merging, decanting, or making other changes outweigh the benefits, sometimes accepting the status quo is the most practical solution. However, this is not always the case.
Why Consider Merging Trusts?
The primary drivers for merging trusts are often rooted in efficiency and practicality:
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Simplification of Administration: Managing multiple trusts inherently means more paperwork, filings, and administrative tasks. Merging can reduce this burden, freeing time for strategic management.
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Cost Reduction: Each trust incurs its own administrative fees, accounting costs, and legal expenses. Consolidating trusts can lead to long-term savings.
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Unified Investment Strategy: Merging allows for a cohesive, effective investment plan rather than fragmented strategies.
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Clarity for Beneficiaries: A simpler structure reduces confusion and potential disputes.
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Addressing Outdated Provisions: Older trusts may include outdated terms. Merging can provide an opportunity to modernize.
When Are Trust Mergers Not a Good Idea?
While the benefits can be significant, merging trusts isn’t always the right move. Situations that may argue against a merger include:
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Different Beneficiary Groups: Combining trusts with distinct beneficiaries can create conflicts of interest.
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Varying Tax Consequences: Different tax objectives—like generation-skipping transfer tax exemptions—can be jeopardized.
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Asset Protection Differences: Merging might weaken protective structures.
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State Law Differences: Trusts governed under different state laws may lose important provisions in a merger.
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Grantor Intent: Respecting the original grantor’s wishes is essential. A merger should not undermine this intent.
The Role of Your Trusted Advisor Team
For estate attorneys, trust officers, and financial advisors, deciding whether to merge trusts requires collaboration and diligence:
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Review Each Trust Document: Examine terms, beneficiaries, powers of appointment, and tax implications.
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Assess Client Goals: Reconfirm the client’s current and long-term objectives.
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Consult Legal and Tax Experts: Ensure compliance with state and federal law while avoiding unintended tax issues.
At Legacy Home Concierge, we believe simplifying complex structures leads to more effective estate management. While our expertise lies in the physical and practical aspects of estate care, we’re proud to serve as a resource for professionals navigating intricate financial landscapes.
Understanding the nuances of trust management—as highlighted by Susan Lipp and Jamie Hopkins—is key to providing comprehensive and valuable service to your clients.
Source: Welcome to Talking T&E for Advisors, featuring Trusts & Estates Editor in Chief Susan Lipp and Jamie Hopkins, Chief Wealth Officer at Bryn Mawr Trust, discussing when it’s appropriate to merge irrevocable trusts and key considerations in doing so.
Disclaimer:
I am not an attorney, and this content is provided for informational purposes only. It should not be construed as legal advice. Readers should consult qualified counsel before making decisions related to estate planning or digital assets.
