Drafting long-range plans for subsequent generations also
raises the stakes for choosing a trustee wisely. Thomas Snowden III is the
beneficiary of a GST with assets that trace back to trusts created by his
great-grandfather, R. Brinkley Snowden, who had named the bank he worked for
as trustee. Two generations had run the National Bank of Commerce in Memphis and
the bank provided much of the family’s wealth, so it seemed a natural
choice.
Twelve years ago, when Thomas, a writer who lives in Sewanee,
Tenn., began receiving trust distributions at age 30, he knew very little about
his trust. Over time, he educated himself and asked officials at the bank (since
acquired by SunTrust) to diversify his portfolio beyond its 30 percent in
SunTrust stock and the 70 percent in SunTrust mutual funds. He also knew that
oil and gas wells owned by the trust had not been recently appraised; he
suspected they were overvalued and, thus, the account had paid too much in fees.
Eventually, Thomas sought to transfer the trust stewardship to South Dakota
Trust, where he believed he would have more input over investment decisions.
Ultimately, Thomas brought his case to probate court and gained control over the
trust. He encourages other wealth holders to include a portability clause in
their trusts, which gives bankers greater incentive to listen to heirs’
requests. In addition, the trust can name the beneficiary as the investment
advisor or delegate, which provides even more financial input. "The whole idea
of a trust is to preserve assets and grow assets," Thomas says. "My grandparents
wanted my sister and me to enjoy life, and because all the control was given to
the trust, the trustees disregarded our interests."
Usually, parents determine how GSTs will work, but sometimes
children have a say—and their input can prove life-altering. Clients of Lew
Altfest, founder of New York–based L.J. Altfest & Co., drafted a GST to
benefit their grandchildren because the funds would be superfluous for their
already-wealthy children. Altfest created the financial plans for the parents,
as well as their three children, two of whom had children of their own. The
plans inspired the son—who at the time was in his 30s, unmarried and aware of
the GST—to get married and start a family so, along with his siblings’ children,
his lineage would benefit from the trust.
Altfest recalls the son telling him, "I’ve got to get going
here." Soon after, the son married and became a father. STATES OF PREFERENCE
Where you
draft a trust should vary, depending on your goals. For example, drafting a
trust in Florida may prove beneficial to an out-of-state grantor. The state’s
trust laws permit generation-skipping trusts spanning 360 years—a far longer
period than most states. If you are concerned about keeping trust assets private
(because you worry that it could sap future generations of career ambitions),
states such as South Dakota allow you to choose at what age young beneficiaries
receive trust statements, rather than at the default age of 18.
Elizabeth Harris is a staff writer for Worth.
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