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Volume 1, Issue 3 Other Terasem Journals |
Issues Facing Trustees of Personal Revival TrustsEric Engelhardt, J.D.page 3 of 5 There are three potential problems with naming an ascertainable, interim beneficiary. First, it will limit the amount that the grantor ultimately receives in the end because interest will be taken from the assets over time. Second, it creates an adverse party in the The Uniform Trust Code states that trusts can be terminated upon consent of the beneficiaries if its continuance is not necessary to achieve a material purpose of the trust. Thus, the legislatures for these jurisdictions are not just letting beneficiaries unilaterally terminate trusts. They only allow them to terminate it if there is no more purpose. The Uniform Trust Code also states that trusts can be terminated if no purpose remains to be achieved or if it is impossible to achieve. It is possible that someone may claim that revival is impossible to achieve. This is a somewhat valid claim because there has not yet been an attempt at revival or a revival attempt that has failed. There is also the Common Law rule, the Claflin Doctrine[1], that states that a trustee can try to block the termination if there is unfulfilled material purpose. One can argue that there is an unfulfilled material purpose if the main purpose is to get the assets back to the grantor. Overall, naming an interim beneficiary is a double-edged sword. In one respect, it provides a party that has standing for one of these terminations by consent, but it also provides an ascertainable beneficiary. Very simply, it gives a purpose to the trust so that it cannot be terminated for lack of purpose. It is possible that a person might challenge the trust on the basis that it violates the Rule Against Perpetuities. As previously mentioned, this is easy to circumvent because more than 17 states have repealed the law. Other states, such as Wyoming and Utah, have a thousand year period for trusts; Florida has 360, and Nevada has a 365 year limitation for trusts. The trick is to create a nexus with one of those states. This can be done by having a trustee that is domiciled in one of those states, which is easy to do because every financial institution has trust companies in Delaware, Nevada, and South Dakota just for these purposes. One thing to keep in mind is that someone must have the power to change the situs[2], just in case the state changes their laws. Footnotes 1. situs – (Latin) “Site”; fixed location; place. Usually the place where a thing has legal ties. |
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charity or heir that will stop receiving income when the grantor is revived. There is a chance that this party might challenge the revived person’s ability to get their assets back. The third problem is that it could create a party who has standing for a termination claim, which leads to the next concept for determining the trust. This can be done by consent or by lack of purpose. A consent claim would entail a combination of the beneficiaries and the trustees consenting to terminate the trust. In some jurisdictions, this can only be done by the beneficiaries.