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Issues Facing Trustees of Personal Revival Trusts

Eric Engelhardt, J.D.

page 2 of 5

Some people choose to disinherit any beneficiary who tries to challenge the trust by adding a no-contest clause. This tactic has limited success in protecting the trust. First, it is limited to beneficiaries. It does not prevent a person who is not named in the will from attacking or invalidating the will. In addition, many states do not uphold the clause. The Uniform Probate Code[1], which has been adopted by 18 states, upholds no-contest clauses only if the challenging party does not have probable cause, and it is quite easy to prove probable cause. Still, no-contest clauses do have some effect as a psychological deterrent.

What are grounds for challenging the trust? One could always try to invalidate a will by saying there was fraud, undue influence, and/or incapacity. It is more likely, however, that challenges will be validity claims for having no ascertainable beneficiary or someone simply trying to terminate the trust. Consider the example of a grantor setting up a trust and asking the trustee to hold and accumulate all assets until the time of revival. In this case, someone could claim that there is no ascertainable beneficiary to the trust. Having an ascertainable beneficiary is one of the fundamental elements to making a trust valid because the court wants to know that there is someone who is going to be able to enforce the terms of the trust.

This attack might come on a couple of levels. The claimant might say that there is no ascertainable beneficiary because the form in which the grantor will be revived is unclear. They could also say that the legal status of the deceased grantor is uncertain. Or, they might say it just does not fall within one of the historically established exceptions for having an ascertainable beneficiary. Incidentally, the exceptions have been that a trust can always be created for an unborn child and for a charitable purpose; in addition, some states have carved out statutory exceptions for honorary trusts, which are trusts for such entities as a pet or to maintain a burial plot.

Naming a Beneficiary
What can be done to avoid a claim that there is no ascertainable beneficiary? One tactic is to name a beneficiary that will start being a beneficiary when the grantor passes away and stops being a beneficiary when the grantor comes back. It could be an individual, a line of descendants, or a charity. The beneficiary does not need to have full access to the trust; perhaps they only have access to the income or a percentage of the trust.

For example, a person could deem that all of the net income from a trust goes to ALCOR[2] for research purposes while the person is gone, and if and when the person is revived, the income comes back to him or her. This arrangement resembles a traditional endowment. The purpose of it is to preserve the corporation and continue to pay out assets or income to the charity. Another option is to set up a trust that directs income to be paid to one’s heirs, as in a dynasty trust, but the income would then revert back to the grantor upon his revival.

Footnotes
1. Uniform Probate Code (U.P.C.) – A uniform law available for adoption by the states to modernize and improve the efficiency of estate administration. The National Conference of Commissioners on Uniform State Laws and the American Law Institute prepared model uniform statutes and recommended their adoption by the states. The Uniform Probate Code is one such model. These codes are not the law of a particular state until that state adopts them.
Hower, Dennis R. Wills, Trusts and Estate Administration For The Paralegal. Minnesota: West 1996. (back to top)

2. ALCOR - The Alcor Life Extension Foundation is the world leader in cryonics, cryonics research, and cryonics technology. Cryonics is the science of using ultra-cold temperature to preserve human life with the intent of restoring good health when technology becomes available to do so. Alcor is a non-profit organization located in Scottsdale, Arizona, founded in 1972.
http://www.alcor.org/ May 3, 2006 11:42 A.M. EST (back to top)

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