Preparing a Trust Administration Handbook for guidance as to the efficient handling of tax issues and long-term goals of the grantor can be the difference between financial success or destitution.

The grantor’s wishes can dictate the trustee’s management, distribution, investment, and spending philosophy, and is a smart financial move, time worthy, and essential to limiting potential crises. Issues with taxes, diminished assets, and the rare multi-generation success story run the gamut from glory to horror. Bad tax advice, ill-advised asset distribution, and unwise management decisions can be foreseen and limited to an extent, but every twist and turn in your beneficiaries’ lives can’t be predicted. Doing your best by developing a Trust Administration Handbook specific to your needs is a critical starting point for wise asset management.

Allowing for strong trustee powers to handle the wide range of distributions, investment management, trust statement generation, an ability to chair a trust committee, and the power to ensure tax compliance, strengthen the long-term feasibility of your trust. 1 As part of your Trust Administration Handbook, it will be important to determine your goals and wishes for real property, a family business, or the ability for beneficiaries to spend money on homes, cars, clothes, or education.

Do you want your apartment building and rental houses sold and the profits put into trust to be distributed to your beneficiaries, or do you wish to keep the business together and produce income? Will you allow your beneficiaries to be involved in the business’ management or do you leave that solely to your trustee? Can your trustee buy your beneficiaries’ homes? What about clothes?

More so, the potential tax consequences of passing a large estate without careful planning is enough to keep a prudent investor awake at night. 2 Smart investors and wealth advisors are taking advantage of recent estate tax legislation allowing couples to safeguard $22 million from the tax collector. 3 Still, there’s no one-size-fits-all Trust Administration Handbook. Instead, each grantor must find the right mixture of controlled self-constraint within their trust. Because of goals and plans changes with time, appropriate planning differ from family-to-family based on that individual family’s philosophy on wealth, education, and other benchmarks determined at home. A thorough Trust Administration Handbook will guide your trust planning as you account for your assets and your distribution goals.

While statistics show 70 percent of the second generation and a whopping 90 percent of the third generation loses the family wealth, there are success stories of multi-generational estates. 4 A Houston-based oil and gas investor’s $9 billion estates passed to his heirs because of a mixture of advanced planning and good luck when the grantor died during a lapse of the Federal Estate Tax. 5

Wealth advisors analyzing the 2017 Tax Act have applauded the tax-friendly generation-skipping trusts, the leveraging of gifts to support the funding of life insurance, and encouraged clients to consider charitable lead trusts. 6 The matriarch of the billionaire Walmart Waltons, worth a combined $100 billion, heavily utilized these charitable lead trusts to minimize her children’s tax burden at her death. 7

ggThough the exterminators at Orkin could kill any household vermin or pest, “shoddy estate planning” led to the collapse of the billionaire pest control Rollins family of Atlanta, Georgia. 8 The Rollins/Orkin saga serves as perhaps the perfect example of when a family trust, a family business, and family relationships go haywire. In the fall of 2010 one branch of the Rollins’ grandchildren staged a coup against their father and uncle when the duo tried making disbursements dependent upon drug tests, credit checks, and private surveillance. 9 Soon enough, Orkin’s Board, led by that father and uncle, retaliated by firing the son/nephew, who was the only member of his generation who worked at the business. 10

Soon enough, details of the son’s messy divorce were splashed across Atlanta newspapers. 11 Some articles even revealed the massive settlement the ex-wife received while other articles discussed how many doorknobs she took from the home. 12

The potential destruction of family relationships or busting up of family businesses, while not entirely avoidable, can be lessened when a family considers the important aspects of a Trust Administration Handbook to begin making their decisions. Productive trust management is capable through sound economic decision making and encouraging a collaborative working relationship among your heirs. More so, planning ahead to minimize your tax burden allows more of your wealth to sit with your heirs instead of in Uncle Sam’s coffers. Still, careful and thorough planning with a Trust Administration Handbook can better ensure family infighting doesn’t deprive unpopular beneficiaries of a job or income. This careful planning can go further, detailing specific purchases allowed for different areas of your beneficiary’s expenses or restricting luxury purchases. Whatever the grantor’s biggest concern, a Trust Administration Handbook eases your time setting down and detailing your worries, goals, and financial hopes directly to your heirs and in writing with your wealth advisor.

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