Having a Trust Committee - Is it Right for You?
We recently attended a great estate planning seminar sponsored by the American Cancer Society. One of the presenters, a statewide renowned attorney and past Lecturer at UC Berkeley School of Law, discussed the issue of diminishing capacity. First off, we must say that we don’t give legal advice. That said, one of his suggestions dealt with a preventative measure clients can take to avoid putting their advisory team (CPA, Attorney, Investment Advisor, etc.) in a difficult ethical situation in the event of their potential incapacity. This is not a push for you to go add this provision tomorrow, but rather, we see the importance of having a discussion as to the merits of this strategy with your attorney to see if they feel (and you as well) that it’s a worthwhile addition to your estate plan.
If you do not have a trust, we encourage speaking with an attorney to see if one is necessary. And if it isn’t, consider sharing this blog with loved ones (parents, uncles, aunts, etc.) who might find this information useful.
Overall, when there is doubt about a client’s mental capacity to make changes to beneficiary designations, to send 3rd parties money from their investment accounts, to change title to assets, etc. your financial team faces a difficult task. Do they respect your wishes, question your requests, and investigate if someone is unduly influencing you, or decline and take the position that you are not in a mental state to make changes to your accounts? You can probably see that none of these are very attractive choices. Further, if a trust has no provisions stating who could take over in the event of your incapacity, we must deal with the risk of a breach of confidentiality in making your original beneficiaries aware of a potential mental capacity issue. The speaker advised strongly that even in this case, we cannot breach our duty of confidentiality to have beneficiaries check in.
As a potential solution, the speaker suggested working with an attorney to discuss appointing a committee in your trust to assess your ability to handle your own finances. This committee could be comprised of your beneficiaries, disinterested 3rd parties such as your attorney, accountant, doctor, etc., or a combination of both your professionals AND beneficiaries. Again, there are likely pros and cons to this approach and we are not legal professionals able to instruct you either way. But, in a “gray area” type situation, where some signs of diminished financial capacity are showing, this committee could determine if you were still capable of handling your own financial affairs. A committee that YOU hand-picked well before it was an issue.
We are planners first and foremost at FFG. Naturally, this suggestion to address these major “what-if capacity issues” early resonated with us. If you have additional questions about this, we would first recommend you contact your attorney who drafted your wills/trusts. If you don’t have one, feel free to ask us or your other financial professionals for a couple of references. That's usually the best place to start.