Today, many estate plans include irrevocable trusts that will continue for the benefit of a spouse’s lifetime and then for the benefit of several generations. Since these trusts are designed to span multiple decades, it is important that they include a trust advisor who will have the ability to adjust the trust provisions as circumstances, beneficiaries, and governing laws change.

What Is A Trust Advisor?

A trust advisor is an individual given the power to ensure that the purposes and goals of the trust are ultimately fulfilled. Generally, the trust advisor is an attorney, CPA, or other independent professional (someone who is not a beneficiary or trustee of the trust). The choice of who to name as the trust advisor will depend on the trustmaker’s wishes and the intended duration of the trust.

Who Should Be Named As A Trust Advisor? 

A trust advisor should be a third party (not the trustmaker, trustee or beneficiary) that is unrelated and not subordinate to the trustmaker. Ideally, this will be an attorney, CPA, or trust company. 

What Powers Should A Trust Advisor Hold?

 A trust advisor can be given as few or as many powers as the trustmaker desires. The trustmaker should carefully consider the specific purposes and goals for their trust and only give the trust advisor powers that will further those purposes and goals.  

Regardless of a trust creator’s intent, below are three powers that all trustmakers should consider giving their trust advisors:

1. Power To Amend Trust Provisions. Some irrevocable trusts that are intended to continue for multiple generations begin as revocable trusts that only become irrevocable after the trust creator dies or at some other time in the future. If the trustmaker fails to update the trust due to changes in circumstances, beneficiaries, or governing laws while the trust is still revocable, a trust advisor can fix these issues after the trust becomes irrevocable. These amendments can include correcting a scrivener’s error (a minor, unintentional mistake), reflecting a change in tax law, or allowing the inclusion of assets in the estate of the beneficiary to achieve an adjustment to the cost-basis of assets within the beneficiary’s estate, reducing or eliminating capital gains taxes. 

2. Power To Add, Remove And Replace Trustees. Giving this power to the trust beneficiaries may defeat the trust creator’s intent since the beneficiaries may be inclined to hastily remove a trustee who does not give in to their each and every request. Instead, a trust advisor can take an objective look at the trustee’s actions or inactions and determine if the trustmaker’s intent is being fulfilled or derailed. The trust advisor can also be called upon to remove or replace a trustee who is not performing their duties appropriately. 

3. Power To Change Trust Situs And Governing Law. A trust situs is the state or jurisdiction that governs it. Since it is impossible to predict where the beneficiaries and trustees of an irrevocable trust will live in the future, this power is critical to ensure that the trust will continue for as long as the trust creator intended and with minimum tax consequences. Giving this power to the trust advisor will allow an objective party to determine if the change will be beneficial or is necessary. 

In addition to the benefits conferred from the powers above, the trust advisor can resolve conflicts between beneficiaries and trustees or between multiple trustees.

What Triggers The Use Of A Trust Advisor

The use of a trust advisor will be initiated by a trustee or beneficiary, who will request the trust advisor take a certain action on the trust. Trust advisors do not monitor the trustee or trust administration.

Trust Advisor Fees

Fees charged vary depending on the trust advisor appointed. Fees are not charged unless and until the trust advisor is called to serve. The potential fees of a trust advisor should be weighed against the potential cost of not having a trust advisor provision, including the cost of court action to modify the trust or appoint a trustee, as well as the potential harm caused by the inability to make a necessary change. 

Final Thoughts On Trust Advisors

Including a trust advisor in an irrevocable trust agreement or a revocable trust agreement that will become irrevocable at some time in the future is critical to the success and longevity of the trust. Nonetheless, the trust advisor should only be given powers that will ensure the purposes and goals of the trust creator are ultimately fulfilled.

If you or anyone in your network has questions about this topic or any other, there are many more resources on our blog. For questions about how we work, see our frequently asked questions page. Always, feel free to contact us to schedule a consultation.

This post was created by Kristen House, a senior estate planning attorney at JM LAW, PLLC.