Unfortunately, there are very few options that would enable you to leave the trust assets to your husband if he survives you. Trusts are often used to control one’s assets after death to restrict use of the funds for selected individuals or limited purposes. It is particularly common for trusts to be established for the life of a child with the balance distributed to his or her descendants after the child’s death. This assures assets stay in the bloodline and avoid distribution to an “in-law” who may re-marry or leave funds to children from a different relationship.
Some trusts include a “power of appointment” provision that enables the beneficiary to select the remainder beneficiary after his or her death. Sometimes this power is broad (a “general power of appointment”) that permits the lifetime beneficiary to designate anyone as the remainder beneficiary. Other times this power is restricted (a “limited power of appointment”) that defines the class of people from which the remainder beneficiary can be selected. In your case it is important to determine if a power of appointment is included in the trust established by your parents and, if so, whether it permits a distribution to your spouse.
It may also be possible to modify the trust with consent of all the remainder beneficiaries. The remainder beneficiaries would need to be over age 18 and should have independent representation before agreeing to waive their rights to the trust. This result is generally difficult to accomplish and may be resisted by the Trustee charged with effectuating the terms of the trust outlined by the Grantor.
Another alternative is to explore the possibility of increasing or accelerating the distributions from the trust so you acquire more of the assets to use or dispose as you wish. Many trusts authorize the Trustee to exercise discretion to make distributions to the lifetime beneficiary for health, education, maintenance or support. This standard can be interpreted broadly or narrowly depending on the Trustee. Trustees, however, must proceed cautiously as the Trustee has a fiduciary duty to balance the interests of the lifetime and remainder beneficiaries. This generally discourages Trustees from depleting the trust in favor of the lifetime beneficiary due to claims that could be asserted by the remainder beneficiaries alleging the trust assets were not adequately preserved.
The terms of every trust are different and must be reviewed carefully. As a result, it is important to seek the advice of an experienced trust and estate attorney to explain the provisions of the trust document and outline your rights and options.
Originally appeared on NJBIZ Biz Brain December 2019