In addition to this dramatic movement in wealth, these developments have quickly, and drastically, altered the estate planner's landscape. What once simply was not part of the discussion now has become an integral part of the planning process.
Dynastic Considerations
Although it is impossible to generalize, the idea of "dead hand" control-that is, the ability to dictate one's own terms past death-does not appear to be central, or even very relevant, to the endowment model. Clients are well-advised to provide for flexibility in perpetual trusts; most practitioners probably can relate numerous stories of difficulties encountered with restrictive trust provisions drafted even a few decades ago that did not anticipate changed circumstances.
At the same time, trusts by their very nature serve the settlor's desire to "protect the beneficiaries from themselves," in many senses of that phrase. If a typical dynasty trust is established with the primary goal of preserving the family wealth from the largest potential creditor-the federal government, in the form of wealth transfer taxes-the desire to protect heirs from creditors, voluntary or otherwise, plays a significant role as well. For most practitioners, drafting a third-party dynasty trust without spendthrift protection is unthinkable. Similarly, the settlor can mandate professional investment management, while giving another person-the beneficiaries, a protector, another third party-the ability to "police" the Trustee with the power to monitor the Trustee's performance and to remove and replace a Trustee that does not perform adequately.
The appropriate structure, therefore, would be one that offers both permanency and flexibility, in order to capture and retain the benefits of both:
Benefits of permanency:
- Centralized and continuous management, and a structure for orderly succession
- Deferral of transfer (and state income) taxation
- Protection from external risks (creditors)
- Protection from internal risks (beneficiaries)
Benefits of flexibility:
- Ability to respond to unanticipated developments
- Division of responsibilities
- Mobility
If one takes Delaware as the bellwether, trust law is rapidly evolving to provide the structures necessary to meet these needs, and to make the trust the preferred vehicle for permanence of legacy.