This is Part 3 of my tour through the Purposeful Planning exercises that I make available to my clients. For Parts 1 and 2, please see below:
ATM vs. Purposeful Trusts
?One of the biggest points of contention and weakness in an estate plan is the relationship between the beneficiary and the trustee. One of the these possible dynamics among many is that the beneficiary treats the trustee like an ATM, something to get money out of. And too often, the trustee does not have enough guidance of what kinds of distributions the trust allows, so they abdicate their responsibilities and become a "yes man" or "yes woman." While this helps prevent strife, this may not actually in the best interests of anyone.
This purposeful exercise, ATM Vs. Purposeful Trusts, is meant to give directions to trustees about what kinds of distributions are allowed. This helps give the trustee guidance, provide explanations and insights into underlying values, and set expectations for beneficiaries. This exercise breaks life down into 8 main categories, which are then divided into several subcategories. Clients then say "Always," "Possibly," and "Never" for however many of these subcategories they wish. The exercise provides space for clients to provide their reasoning or add additional subcategories (which my wife and I did when we filled this out).
The main categories are: Health; Education; Living Expenses and Support; Buying a Home; Starting or Expanding a Business; Paying off a Debt or Mortgage; Doing Good in the World or Making Gifts to Charities; and Vacations, Sabbaticals, or Walk-About Experiences.
I want to provide the subcategories under one of the main categories, Health, to give you an idea of how comprehensive this exercise can be. There are probably about 75 such subcategories across all the main categories.
____ a. Health insurance premiums
____ b. Surgery
____ c. Organ transplants
____ d. Psychiatric care
____ e. Physical therapy
____ f. Hospitalization
____ g. Convalescent care
____ h. Home care and costs of invalidism
____ i. Preventative procedures or tests
____ j. Dues, fees and expenses associated with spas, health clubs, athletic leagues and organizations, golf, tennis or country clubs or for the purchase of sporting equipment which will be used for recreational or therapeutic purposes
____ k. Hiring or reimbursing a beneficiary for his or her expenses in engaging security personnel, privacy and security consultants and services and other consultants who provide advice, counsel or services in connection with the personal safety of a beneficiary or such beneficiary’s family.
____ l. Cosmetic or elective procedures such as dental, orthodontics, hair transplants or restoration, eyewear and vision procedures and shall also include non-traditional medicine, procedures and therapies
____ m. Transportation expenses which are necessary or primarily related to a beneficiary’s health needs
____ n. Random drug testing if the trustee is aware a beneficiary has had substance abuse problems
____ o. Addiction recovery treatments and programs
____ p. Additional therapies, procedures, equipment, drugs and supplements which aren’t even available at the time of the establishment of the trust but may become available due to advances in medical research or health care practices which occur hereafter
____ q. Experimental procedures which aren’t yet considered standard care or may not even be permissible to administer in the U.S.
____ r. Is there any other procedure you can think of today which you would like to see included as something permissible for the trustee to authorize payment for
These are the questions in the Health main category. A client can mark "Always," "Possibly," and "Never" for each of these subcategories and explain their reasoning below these questions. These explanations can give the trustee additional insight, which can be invaluable if the trustee has to exercise discretion over a distribution.
What would you put in this category?
What clients of yours would benefit from this type of exercise?
