Category: Trusts

While many wines get better with age, the same cannot be said for some irrevocable trusts.  Maybe you are the beneficiary of a trust created by your great-grandfather over 70 years ago, and that trust no longer makes sense. Or maybe you created an irrevocable trust over 20 years ago, and it no longer makes sense for your current situation. Wine connoisseurs may wonder if there is any way to fix an irrevocable trust that has turned from a fine wine into vinegar. You may be surprised to learn that under certain circumstances, the answer is yes—by decanting the old, broken trust into a brand new one.

What Does It Mean to Decant a Trust?

Wine lovers know that the term decant means to pour wine from one container into another to open up the aromas and flavors of the wine. In the world of irrevocable trusts, decanting refers to the transfer of some or all of the accounts and property owned by an existing trust into a brand new trust with different and more favorable terms.

When Does It Make Sense to Decant a Trust?

Decanting a trust makes sense under myriad circumstances, including when you would like to make the following types of changes:

• Tweak the trustee provisions to clarify who can or cannot serve as trustee
• Expand or limit the trustee’s powers
• Convert a trust that terminates when a beneficiary reaches a certain age into a lifetime trust
• Change a trust in which a beneficiary is entitled to receive their inheritance at a certain point or for certain purposes into a full discretionary trust in which the trustee decides when money will be given to the beneficiary in order to protect the trust’s accounts and property from the beneficiary’s creditors
• Clarify ambiguous provisions or drafting errors in the existing trust
• Change the governing law or trust situs to a less taxing or more beneficiary-friendly state
• Merge similar trusts into a single trust for the same beneficiary
• Create separate trusts from a single trust to address the differing needs of multiple beneficiaries
• Provide for and protect a special needs beneficiary   

What Is the Process for Decanting a Trust?

A state’s statutes or case law can allow decanting. Additionally, the trust agreement may contain specific instructions with regard to when or how a trust may be decanted.

Once it is determined that a trust can and should be decanted, the next step is for the trustee to create the new trust agreement with the desired provisions. The trustee must then transfer some or all of the accounts and property from the existing trust into the new trust. Any accounts or property remaining in the existing trust will continue to be administered under its terms; an empty trust will be terminated.

Decanting Is Not the Only Solution to Fix a Broken Trust

While decanting may work under certain circumstances, fortunately, it is not the only way to fix a “broken” irrevocable trust. Our firm can help you evaluate options for fixing your broken trust and determine which method will work best for your situation. If you have a trust that has turned to vinegar and is not what you want it to be, give us a call.

Today, many estate plans contain an irrevocable trust that will continue for the benefit of a spouse’s lifetime and then continue for the benefit of several generations. Because trusts like these are designed to span multiple decades, it is important that they include trust decanting provisions to address changes in circumstances, beneficiaries, and governing laws. 

What is trust decanting?

When a bottle of wine is decanted, it is poured from one container into another. When a trust is decanted, the accounts and property from the existing trust are removed and distributed into a new trust that has different and more favorable terms.  

When should a trust be decanted?

Provisions for trust decanting should be included in trusts that are intended to last decades into the future. Decanting can do the following:

1. Clarify ambiguities or drafting errors in the trust agreement. As trust beneficiaries die and younger generations become the new heirs, vague provisions or outright mistakes in the original trust agreement may become apparent. Decanting can be used to correct these problems.
2. Provide for a special needs beneficiary. A trust that is not tailored to provide for a special needs beneficiary will cause the beneficiary to lose government benefits. Decanting can be used to turn a trust in which the beneficiary is entitled to money into a full supplemental needs trust.
3. Protect the trust’s accounts and property from the beneficiary’s creditors. A trust that gives the beneficiary control or access to their inheritance puts that inheritance at risk of being snatched by the beneficiary’s creditors, rapidly depleting the inheritance if the beneficiary is sued. Decanting can be used to convert a trust without any asset protection features into a full discretionary trust that the beneficiary’s creditors will not be able to reach.
4. Merge similar trusts into a single trust or create separate trusts from a single trust. An individual may be the beneficiary of multiple trusts that have similar terms. Decanting can be used to combine these trusts into one trust that will reduce administrative costs and oversight. On the other hand, a single trust that has multiple beneficiaries with differing needs can be decanted into separate trusts tailored to each individual beneficiary.
5. Change the governing law or situs to a different state. Changes in state and federal laws can adversely affect the administration and taxation of a multigenerational trust. Decanting can be used to take a trust that is governed by laws that have become unfavorable and convert it into a trust that is governed by different and more advantageous laws.   

Final Thoughts on Trust Decanting

Including trust decanting provisions 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. This will help ensure that the trust agreement has the flexibility necessary to avoid court intervention to fix a trust that no longer makes practical or economic sense.  

If you are interested in adding trust decanting provisions to your trust or would like to have the decanting provisions of your trust reviewed, please call our office.

A trustee is a person or entity responsible for managing and administering your trust according to your instructions and in accordance with state law. They are considered a fiduciary (meaning they are held to a higher standard of care and owe certain duties to the beneficiaries). As a fiduciary, a trustee must protect the trust’s investments and act in the best interests of the beneficiaries. They must prepare and maintain trust accounting records and prepare tax-related forms, providing this information to the beneficiaries at their request. At some point, they may need or be required to liquidate or sell the trust’s accounts and property. 

A Trustee’s Authority to Sell Assets While Administering the Trust

When administering a trust, the trustee might encounter situations in which they need to convert trust assets into cash to provide liquidity to the trust. This could mean converting trust assets such as stocks and bonds or selling other trust property such as real estate or other high-value assets to generate the necessary funds. Though this decision must be based on prudent investor rules or standards and be in the best interest of the beneficiaries, trustees generally do not need beneficiary approval to liquidate or sell trust property, but they may seek it to avoid potential arguments in court regarding their decisions and authority. The biggest restriction is that trustees are not allowed to sell trust property for their own benefit. There may be an exception to this restriction if the trustee is also a trust beneficiary.

Creating Liquidity 

A trustee may need to create liquidity for various reasons:

• Meeting financial obligations. The trust may have ongoing financial commitments, such as taxes, mortgage payments, or insurance premiums. By creating liquidity, the trustee can fulfill these obligations without disrupting the overall trust management.
• Covering administrative costs. There could be administrative expenses related to legal and accounting services, as well as fees for managing the trust. Creating liquidity ensures that the trustee can cover these costs promptly and efficiently.
• Fulfilling distributions. If the trust mandates periodic or one-time distributions to beneficiaries, creating sufficient liquidity allows the trustee to meet these distribution requirements in a timely manner.
• Responding to opportunities or challenges. Market opportunities or unexpected financial challenges may arise that require quick access to funds. Creating liquidity enables the trustee to seize favorable investment opportunities or address unforeseen financial needs effectively.

Investment Strategy

A trustee has the authority and responsibility to manage the trust’s investments in a manner that aligns with the trust’s goals and changing financial circumstances. It may be necessary to modify the investment strategy for a variety of reasons:

• Evaluating economic conditions. The trustee must continuously evaluate economic conditions, market trends, and the performance of the trust’s assets, such as accounts and other property. If the existing investment strategy no longer serves the trust’s objectives, the trustee may need to consider adjustments.
• Risk management. Based on the trust’s performance and the financial landscape, the trustee may need to rebalance the portfolio to ensure an appropriate level of risk and potential return. This could involve diversifying investments or reallocating assets.
• Adapting to beneficiary needs. Changes in beneficiary circumstances, such as increased education expenses or healthcare needs, may necessitate a shift in the investment strategy to generate income or accommodate specific beneficiary requirements.
• Long-term growth versus income generation. Depending on the trust’s purpose, the trustee may need to adjust the investment approach to prioritize long-term growth, income generation, or a balanced approach, ensuring the trust’s sustainability and fulfillment of its intended purpose.

You Can Control the Sale of the Trust’s Assets

If you are the trustmaker and have concerns about a trustee’s authority to liquidate or sell accounts and property, you can provide specific guidelines controlling the sale of the trust’s assets.

When establishing a trust, you may have specific assets you would like to preserve, whether for sentimental reasons, future generations, or other purposes. However, you should be cautious when including provisions that restrict the liquidation or sale of particular assets.

Placing restrictions on liquidating or selling assets in the trust can help preserve family heirlooms, properties with historical or emotional significance, or specific investments that align with the trust’s long-term goals. However, overly restrictive provisions can present challenges to the trustee, especially in situations where the trust may require liquidity, when there is a need to change the investment strategy to meet financial obligations or adapt to market conditions, or if there have been changes in tax laws, economic conditions, or family dynamics.

It is essential to strike a balance between preserving important assets like certain property or accounts and allowing the trustee the flexibility needed to effectively manage the trust, ensuring the trust’s long-term viability and the best interests of the beneficiaries.

A Trustee’s Responsibility Regarding Distributions to Beneficiaries

Overall, the trustee must adhere to the instructions laid out in the trust agreement. If the trust’s terms specify that the trustee must distribute money or property to a beneficiary at a particular future date or upon meeting specific conditions, the trustee is obligated to follow these instructions precisely. That is why making informed decisions when creating a trust and defining the trustee’s role and responsibilities is important. 

Stipulating specific instructions regarding when and how distributions should be made to beneficiaries often requires attaching conditions to distributions, such as timelines and other triggering events like a beneficiary’s age or completion of a milestone. Whatever the conditions are, the trustee will usually be required to follow them unless they are illegal or against public policy.

Communication Between a Trustee and Beneficiaries Is Critical When Selling Trust Assets

The trustee should—and in some instances is required to—maintain open communication with both the beneficiaries and any co-trustees, keeping them informed about the trust’s status and decisions when creating liquidity and changing investment strategies that may affect upcoming distributions. Transparency helps answer questions and manage expectations.

Accurate and thorough recordkeeping is essential to demonstrate compliance with the trust terms and the law. Detailed records can help explain the rationale behind each decision, and relevant documents can support the actions taken by the trustee.

If you are a trustee and are unsure about the trust terms relating to the management or sale of assets, we can assist you and any financial professionals with whom you are working. If you are creating an estate plan that includes a trust, working with an experienced attorney to craft a comprehensive trust agreement can help ensure your trustee’s compliance and protect the interests of both the trust and its beneficiaries.

We can help you memorialize your intentions in your trust agreement and strike a balance between preserving your life savings and granting the trustee the necessary flexibility to manage the trust successfully. Give us a call to schedule your appointment today.

Did you know that irrevocable trusts can be modified? If you did not, you are not alone. The name lends itself to that very misconception. However, the truth is that changes in laws, family, trustees, and finances can frustrate the trustmaker’s original intent when the trust was created. Or, sometimes, an error in the trust document is identified. When this happens, it is wise to consider changing the trust, even if that trust is irrevocable.

Here are three examples of when an irrevocable trust can, and should, be modified or terminated:

1. Changing tax law. Adam created an irrevocable trust in 1980 that held a life insurance policy. Due to the federal estate tax exemption at that time, Adam needed a tool that would remove the value of the proceeds from his estate at his death. To facilitate this, an irrevocable life insurance trust was created to own the life insurance policy and be the beneficiary of the proceeds at Adam’s death. Today, the federal estate tax exemption has significantly increased and Adam no longer needs to worry about removing the life insurance proceeds from his estate to avoid estate taxation at his death.  

2. Changing family circumstances. Barbara created an irrevocable trust for her grandchild, Christine. Now an adult, Christine has a disability and would benefit from government assistance. According to the current instructions for how money is to be given to Christine, Barbara’s trust would unintentionally disqualify Christine from receiving much-needed government assistance.

3. Discovering errors. David Sr. created an irrevocable trust to provide for his numerous children and grandchildren. However, after the trust was created, his son (David Jr.) discovered that his son (David III) had been mistakenly omitted from the document.  

Are you sure your trust is still working for you?

If you are not sure whether an irrevocable trust is still a good fit or if you wonder whether you can benefit more from your trust, we are happy to meet with you so we can analyze your current trust. Perhaps modifying or terminating your irrevocable trust is a good option. Making that determination simply requires a conversation about your goals and a review of the trust itself. Please call our office now to schedule time to review your current trust or discuss the potential benefits that a trust can provide to address your unique situation and goals.

Trust protectors are commonly used in the United States. Essentially, a trust protector is someone who serves as an appointed authority over a trust that will be in effect for a long period of time. Trust protectors ensure that trustees maintain the integrity of the trust, make solid distribution and investment decisions, and adapt the trust to changes in law and circumstance.  

Whenever changes occur, as they are bound to do, the trust protector has the power to modify the trust to carry out the trustmaker’s intent. Significantly, the trust protector has the power to act without going to court—a key benefit that saves time and money and honors family privacy.  

Here Are 6 Ways a Trust Protector Can Help You 

Your trust protector can take the following actions:

1. Remove or replace a trustee who is not performing their duties appropriately or is no longer able or willing to serve

2. Amend the trust to reflect changes in the law

3. Resolve conflicts between beneficiaries and trustees or between multiple trustees

4. Modify distributions from the trust in response to changes in beneficiaries’ lives such as premature death, divorce, drug addiction, disability, or lawsuits

5. Allow new beneficiaries to be added when new descendants are born  

6. Veto investment decisions that might be unwise

Warning

The key to making a trust protector work for you is to be very specific about the powers available to that person. It is important to authorize that person, and any future trust protectors, to fulfill their duty to carry out the trustmaker’s intent—not their own. 

Can You Benefit from a Trust Protector?

Generally speaking, the answer is yes. Trust protectors provide flexibility and an extra layer of protection for the trustmaker’s intent as well as for the trust’s accounts and property and its beneficiaries. Trust protector provisions can easily be added to a new trust, and older trusts may be changed to add a trust protector. If you have created a trust or are a beneficiary of a trust that feels outdated, call our office now.

Some trusts are irrevocable as soon as they are created, which means that, in general, the trustmaker (the person who created and funded the trust) cannot terminate or modify it and take back the money or property that it holds. You may wonder why anyone would want an irrevocable trust, but irrevocable trusts can provide some very important benefits, particularly asset protection, tax minimization, and maintaining eligibility for government benefits. In contrast, trustmakers may amend or revoke a revocable living trust at any time prior to their death, but at their death the trust becomes irrevocable.

Although irrevocable trusts generally cannot be changed, many states’ laws allow interested parties to modify a trust in certain circumstances using a binding nonjudicial settlement agreement—assuming there is no language in the trust document prohibiting their use or providing another way for the trustee and beneficiaries to consent to modifications. In the absence of a statute permitting a nonjudicial settlement agreement, the interested parties under state law, which may include the grantor, the trustee, or the current or future beneficiaries or their representatives, would have to petition a court to modify the trust or interpret unclear provisions. In states where nonjudicial settlement agreements are permitted, their use can avoid the costs, delays, and lack of privacy associated with judicial proceedings.

When May a Nonjudicial Settlement Agreement Be Used?

A nonjudicial settlement agreement is only valid if it does not violate a material purpose of the trust or terminate the trust in an impermissible manner and any modification would have been approved by a court if the parties had petitioned the court. Although there are variations in each state’s statute governing nonjudicial settlements, there are several situations in which a nonjudicial settlement agreement is typically allowed, including the following:

• Interpretation of the terms of the trust document if they are unclear
• Approval of a trustee’s report or accounting
• Authorization or prohibition of certain actions by the trustee
• Appointment or resignation of a trustee or determination of the trustee’s compensation
• Transfer of the location where the trust is administered
• Determination of the liability of the trustee for actions related to the trust

Many states’ statutes also broadly allow a nonjudicial settlement to address any matter that a court otherwise would resolve. A nonjudicial settlement must be signed by all interested persons to be valid.

Examples

1. Assume Mike creates a trust for the benefit of Marcia, Jan, Cindy, Greg, Peter, and Bobby and names Carol as trustee. The trust document does not name a successor trustee and does not specify a method for naming a replacement trustee. On a trip to Hawaii, Mike and Carol are killed in a car accident after they find a mysterious tiki idol thought to bring bad luck to whoever touches it. The beneficiaries, who are all adults, may enter into a nonjudicial settlement agreement to appoint a new trustee.  

2. Assume Morticia creates a trust naming her husband, Gomez, as trustee, and leaving one half of the funds in her savings account to each of her children, Wednesday and Pugsley. Unfortunately, before Morticia passes away, Wednesday dies in a freak accident while trying to teach Lurch to dance, leaving three of her own adult children. The trust does not clearly state whether Wednesday’s one-half share of the savings account should go to her children; the funds should be split equally, with Pugsley and Wednesday’s three children each receiving one-fourth; or all of the funds in the savings account should go to Pugsley. Pugsley and Wednesday’s three children, who are all adults, may enter into a nonjudicial settlement agreement in which they mutually consent to an interpretation of the terms of the trust regarding distribution. It is important to note that gift tax consequences result when value shifts from one beneficiary to another. However, a settlement resulting from a bona fide dispute or litigation should be treated as a transfer for full and adequate consideration and not a gift for gift tax purposes.

3. Assume that Homer and Marge own a snow plow business that their son Bart has been operating for twenty years. However, Homer and Marge’s trust leaves everything, including the business, to all of their children—Bart, Lisa, and Maggie—in equal shares. The business was the main piece of property owned by the trust. After Homer and Marge pass away, Bart wants to purchase the business and fund Lisa and Maggie’s shares with the proceeds of the sale. Bart, Lisa, and Maggie, who are all adults, may enter into a nonjudicial settlement agreement agreeing to deviate from the original distribution specified in the trust document. 

What Are the Downsides to a Nonjudicial Settlement Agreement?

Possible tax consequences. If a nonjudicial settlement agreement changes a trust’s distribution provisions or the beneficiaries’ interests, the change may result in transfer or income tax liability. For example, if a modification shifts a beneficial interest in the trust to a beneficiary who is a generation younger than the prior beneficiary, liability for the generation-skipping transfer tax may occur. If a nonjudicial settlement agreement involves the transfer of an interest in property to another beneficiary, for example, to settle a dispute, gift tax liability may arise. Certain modifications may also have income tax consequences. It is also important to keep in mind that some states impose their own inheritance taxes on certain transfers to relatives or third parties, which should be considered.

May be contrary to your loved one’s intentions. The trustmaker may have had strong feelings about how the money and property transferred to the trust should be handled, and a modification or termination of the trust pursuant to a nonjudicial settlement agreement may not be what they would have wanted. For example, terminating a trust prior to the original termination date because the beneficiary needs the funds for daily living expenses may not violate a material purpose of the trust; but, if the trustmaker thought the beneficiary was too immature to handle the funds before a certain age, they would not want the trust to terminate early.

We Can Help

If you are the beneficiary or trustee of a trust with provisions that are confusing or incomplete, or if circumstances have changed since the trust document was drafted that make its application difficult or impossible, a nonjudicial settlement agreement may be able to resolve those issues. Call us today so we can meet to discuss these or other issues that you have encountered in the administration of a trust.

Trusts are typically set up for the benefit of a trustmaker’s loved ones, a charitable organization, or a third party, with the trust money and property being distributed to the beneficiaries upon the trustmaker’s death. But there are situations in which a person may want to set up a trust to be used during their lifetime for their own benefit to maintain privacy or avoid a potential conflict of interest. In such cases, a blind trust might be appropriate. 

No state or federal laws require the use of blind trusts, but they can be an effective tool for complying with laws that prohibit insider activities. Blind trusts are also used by lottery winners to remain anonymous. 

How Blind Trusts Work

The “blind” part of a blind trust refers to the idea that the trustmaker, or grantor (i.e., the person who establishes the trust), remains in the dark about how the trust’s money and property are managed. Although they may lay out general parameters for the trust such as investment goals prior to creating it, once the trust is formally established, the trustee (the person designated to control the trust assets) has full discretion to handle the trust’s holdings and has no communication with the trustmaker. 

The beneficiary of a blind trust also has no knowledge of what goes on with the trust. However, in most cases, the trustmaker is also the beneficiary. That is, the trust contains their personal money and property, and the trustee manages that money and property for the benefit of the trustmaker-beneficiary—the trustmaker-beneficiary just has no knowledge of, or control over, the activities of the trust. 

Blind Trust versus Nonblind Trust

A blind trust differs from a normal trust in several ways. The biggest difference is that in a nonblind trust, the trustmaker has discretion over trust money and property. Often, they give explicit instructions to the trustee about how to run the trust, such as when and how to make distributions to a beneficiary. Usually, the trustmaker and trustee consult each other, and in some cases are the same person. And, while the beneficiary may be at the trustee’s mercy as far as receiving trust distributions from a blind trust, with a nonblind trust, the beneficiary may be in contact with the trustee and be aware of trust activities. 

Revocable versus Irrevocable Blind Trust

Blind trusts can be irrevocable or revocable. A trustmaker has the authority to modify or terminate a revocable trust and take back control of the accounts and property upon termination. An irrevocable trust cannot be modified or terminated by the trustmaker. In other words, once the trustmaker places money and property in an irrevocable blind trust, the trustmaker permanently gives up control over that money and property. 

Blind Trusts and Public Figures

Viewers of the television show Billions may be familiar with blind trusts, thanks to the character Chuck Rhoades. For anyone who has not seen the show, Chuck is a New York prosecutor known for his flawless record of winning insider trading cases. Chuck put his investments in a blind trust managed by his father to show the public that his actions as a public figure will not be influenced by his personal financial holdings. 

This is a tactic employed by real-life politicians as well. While no state requires public figures to use a blind trust while in office, most states and the federal government have laws that require government employees to recuse themselves and disclose when their public duties may affect their financial interests. These laws are intended to maintain trust in public institutions, helping to defend against legislative self-dealing, or the perception of it. 

Blind trusts are a workaround to real or perceived conflicts of interest. A public figure can place the money and property that might create a conflict of interest into a blind trust and turn the money and property over to an independent trustee. The official can then claim that they do not know how their actions in office will affect their private financial interests, because they have no control over those interests. 

A dozen states have laws that regulate blind trusts, and these regulations must be followed closely. Federal ethics laws also have rules about what qualifies as a blind trust and how it should function to comply with the law. 

Blind Trusts and Company Executives

Blind trusts are not just for government officials. Conflicts of interest can similarly impact officers, directors, and others who own shares in a company and have information not available to the public. Ownership of these shares can call into question whether a corporate insider is acting in the best interests of the company and its shareholders—as federal financial law requires them to—or in their own interests. 

The Securities Act restricts the sale of shares owned by corporate insiders for as long as they are affiliated with the company. Publicly traded companies usually only allow insiders to trade company stock during “window periods.” A blind trust set up during a window period can be a mechanism for avoiding these trading limitations. The trustee of the insider’s blind trust is given guidelines for selling company stock, and the trustee is then free to execute this plan without running afoul of insider trading laws. 

Blind Trusts and Lottery Winners

While politicians and company insiders may use a blind trust to avoid conflicts of interest, a lottery winner or person who receives a financial windfall may use this type of trust for a different reason: financial privacy. 

Let us say that you are the lucky winner of the $1 billion Powerball lottery. As excited as you are to spread the news and raise the big cardboard check on television, you decide that you want to remain anonymous. There are plenty of reasons to keep a low profile—reporters, scammers, harassment, and requests for money from friends and family, to name just a few. But not all states allow lottery winners to remain anonymous. 

If you do not live in one of those states and you want anonymity, you can use a blind trust to protect your identity. However, “blind” trust is a bit of a misnomer in this situation. It is just a regular trust that uses a name other than your legal name. You retain control of the trust and its money and property, but you are “blind” to the public because the trust is not easily linkable to you. 

Don’t Go Blind into a Blind Trust—Talk to a Lawyer

Establishing a blind trust can be complex. Depending on its use, there may be federal and state laws to comply with, including rules related to conflicts and disclosures, reporting requirements, who may serve as trustee, and allowable communications between the trustee and beneficiary. 

Blind trusts are set up for very specific reasons, and for them to function as intended, they must be set up carefully. If you want to prevent conflicts of interest or maintain privacy, it is vital that you work with an experienced estate planning attorney to ensure the accuracy and validity of your blind trust. Please contact us to schedule an appointment.

When someone has named you as the executor (also known as a personal representative) of their will or the trustee of their trust passes away, you are obligated to distribute that person’s money and property according to the document’s terms to the designated beneficiaries. (For convenience, the roles of executor and trustee will be referred to throughout this article as the general term fiduciary.) Sometimes, perhaps because of a family conflict or just falling out of touch, the whereabouts of a will or trust beneficiary are unknown. What should you, as the fiduciary, do if you cannot locate a beneficiary of the will or trust?

As a fiduciary, you have an obligation to use reasonable diligence to locate a missing beneficiary. What is considered reasonable depends on the circumstances, including what efforts have been made to locate the missing beneficiary and how much money or property is at stake.

At a minimum, a fiduciary should call the last known phone number and send notice of the estate or trust administration to the last known address. If this initial effort yields no results, then the fiduciary should contact known family members or friends for information that may lead to the beneficiary’s location, search social media and people-search sites on the Internet, publish notice in the newspaper, check property records, and otherwise use their best efforts to locate the missing beneficiary.

If the value of property to be distributed to the missing beneficiary is very small, then the fiduciary will likely not be required to spend a lot of the estate or trust’s money to locate the missing beneficiary. If, however, the property value is significant, then the fiduciary may have to take additional efforts to locate the missing beneficiary to satisfy the reasonable diligence requirement. Such additional efforts may include hiring a private investigator or using an heir search service.

Heir Search Services

Heir search services are dedicated specialists to find missing beneficiaries. They employ forensic genealogists and estate investigators who conduct extensive searches throughout the United States or the world to locate missing beneficiaries. They often have access to additional records, such as birth, marriage, and death certificates, adoption and other court records, and genealogical databases.

Heir search services can provide the added benefit of verifying the identity of the beneficiary to ensure that you, as the fiduciary, make distributions to the proper person and not someone pretending to be the beneficiary to take advantage of a fiduciary’s ignorance.

If the missing beneficiary cannot be found even with the help of a professional heir search service, you can petition the court to allow you to make a preliminary distribution of money and property to the beneficiaries who have been located. The court will likely order that the missing beneficiary’s property be held in trust for a certain period of time, as specified by state law, allowing time for the missing beneficiary to claim it. You may also be able to obtain indemnity insurance to protect you in case a missing beneficiary later appears and makes a claim after the estate or trust has already been distributed.

Work with an Attorney

Locating a missing beneficiary can take considerable time and cause significant delays in an estate and trust administration. Meanwhile, beneficiaries who have been located and expect to receive their share can become impatient. In situations where a missing beneficiary adds a layer of complexity to an administration, it can be advantageous to hire a legal professional who has experience in navigating the demands of impatient beneficiaries while protecting your interests as the fiduciary.

Further, in cases where a missing beneficiary cannot be located and it becomes necessary to petition the court to allow a preliminary distribution to the known beneficiaries, using a legal professional’s expertise of the state’s laws and procedures can lead to a quicker resolution of the issue.

Being named as the fiduciary of a will or trust carries a large responsibility to locate the beneficiaries and make distributions to them in accordance with the terms of the will or trust. When a beneficiary cannot be located, the fiduciary has an obligation to be diligent in their efforts to find the beneficiary, including hiring a professional heir search service. We have the expertise and resources to help you navigate the additional complexities that come with a missing beneficiary. Contact us if you would like to discuss how we can help you with your administration or craft your own plan to provide your loved ones with a smooth administration.