Trusts today aren’t your grandmother’s trust. Using a South Dakota Trust, you can have more flexibility and control over the intent. Okay we’ll start with who’s whom in a Trust?
Let’s say you’re the beneficiary of a trust. But what does that mean?
The Trust is created to hold assets for the beneficiary, which may be an individual or group of individuals. The trustee is the person that holds legal title to the assets. The trustee has a fiduciary duty to manage trust assets in the best interests of beneficiaries. The rights of a trust beneficiary depend on the type of trust and the type of beneficiary.
A grantor or settlor is the person that establishes a trust.
That could be your parent or grandparent. The settlor can go by several other names: donor, grantor, trustor and trust-maker. In this example we are going to call the person the Grantor. Also, in our example, your grandmother set up the trust for you, the beneficiary.
The Grantor’s role is to legally transfer control of an asset to a trustee, who manages it for one or more beneficiaries. The trustee in this case would be your mother.
Trust wording is important.
The trust needs to reflect the intent of the Grantor. The agreement wording needs to be clear and specific. If it isn’t clear, the trust could be depleted and there might not be anything left for other beneficiaries or the next generation.
I’m a financial person not a lawyer, but I do understand the implications if the Grantor’s intent isn’t clear.
Here’s another example:
There was a case where two siblings were the trust beneficiaries. The son has had special needs since birth. The father dies and the son needs more care and the local family care provider wants to use the trust funds to pay for it. The Grantor set up a true spend-thrift trust which means no creditor of a beneficiary may make a claim. The final decision was that the trust was to supplement, not fully support, the son, protecting the trust for the other sibling.
In another case, the trust was decided to be a support trust and the assets would be used for the care of a sister with multiple sclerosis. Her brother said that additional money was needed for her medical care as she as not eligible for assistance. The trust outlined the sister’s medical care as the primary goal, even at the expense of the other beneficiaries. The decision was that the trust should pay, for the sister’s nursing home care.
The key word in both of these cases is the word MAY and must be read in context to determine if it means an act is optional or mandatory. The trust authorizes the payment, but it is within the discretion of the trustee as to whether the beneficiary needs support, maintenance or medical expenses.