My Trust does not have a Protector, do I need one?
A Trust Protector is without question “the” most important part of a Trust structure. The Protector is your safety net, advisor, confidant and, as the name implies, your protector of your trust’s operations, trust assets, modifier of the trust to reflect your change of wishes and, most importantly, your insurer that your wishes are carried out by the Trustees and if not, then exercises the power to replace Trustees not adhering to your wishes within the Non-Charitable Purpose Trust or as European countries describe these Trusts as Private Foundation.
I have a Revocable Living/Family Trust and Charitable Trust, is this also a Private Foundation?
No, Revocable Living/Family Trusts are created to avoid the expense and time of a person’s estate being probated in the Probate Courts. California, for example, is now geared on a fast-track with the Probate Courts, but this still means a simple estate will take an average of 2 years to administer and finally distribute estate assets to heirs minus large fees for the appraiser, accountant, attorney, and court costs.
I have a Charitable Trust, is this also a Private Foundation?
No, Charitable Trusts have many types of trusts and one over-riding purpose; charitable donative intent. The Private Foundation is created to be advantageous during the person’s lifetime as well as after death with purposes that need not be strictly charitable to government recognized charities. Just a few types of Charitable Trust are —the Clifford trust, the charitable remainder trust, the minor’s trust, the grantor retained income and annuity trusts, the qualified personal residence trust, and so on.
How would you summarize a Private Foundation?
Private Foundations have existed in Europe and other countries for decades while only recent legislation has allowed Non-Charitable Trusts without human beneficiaries for pets. These U.S. trusts are limited to 21 years and need an enforcer to enforce the terms of the trust’s purpose and are subject to the jurisdiction of the U.S. and State laws. Private Foundations are most beneficial when established in non-U.S. jurisdictions and have a foreign Protector to enforce the terms of the foundation which can have unlimited life. One of the most salient benefits to the Private Foundation is to be immune from heirs’ suing the foundation for being over-funded by the deceased and therefore the overage should be paid to the heirs. Also, jurisdictions like the Cook Islands do no recognize foreign judgments, including the U.S., and therefore the heirs would need to re-litigate their case in the Cook Islands wherein they would lose.
Can a Private Foundation benefit me even with my established estate plan?
Yes, a Private Foundation, especially a foreign situs Private Foundation, is an excellent compliment to your established estate plan that does not conflict nor add more complexity. A Private Foundation is just that; private. It does not get disclosed to one’s heirs or creditors in probating the estate or in Probate Court. Heirs are not empowered to see your Private Foundation or learn who is to benefit from the Foundation which then does not allow heirs to bring legal action against the Private Foundation for a claim of overfunding of the estate for the benefit expressed in the Foundation.
Here is an excellent example:
A Lincoln County Judge, Earl Morgan, planned his estate and revised his Will to leave about $3.1 million to the local animal shelter, Paws-itive Partners. I knew Judge Morgan and he was regarded an one of the best Judges to serve on the bench in North Platte, Nebraska and before that he was a highly regarded attorney. Judge Morgan also provided for his two children in his will of $100,000 each.
So, you have a valid estate plan done for a highly regarded attorney for his estate you would assume his wishes would be carried out without any litigation. Wrong!
Judge Morgan died with his children each well over the age of 50. Then, you assume that the children were capable of providing for themselves and would accept their father’s wishes. What happened next is all too typical of an estate plan where the decedent is no longer in control of his/her estate and relies on the children to follow the estate’s wishes and the children no longer are willing to honor their deceased parent’s wishes to do as the parent requests in the Will or Trust. The children went to court and a settlement was reached with and local animal shelter because the shelter’s funding is exhausted for the care and shelter of the unfortunate animals that may be euthanized if not adopted; not for the possible of expensive and timely litigation. This, I believe, was the main reason the shelter settled before protracted litigation costs were incurred and also the children were probably financially able to sustain a protracted legal battle. The settlement took the $3.1 million assigned in the Will to Paw-itive Partners and left them with $600,000 while the remainder was given to the two children.
A Private Foundation set up properly would have completely eliminated any legal battle and ensured the shelter received the money set out by the Judge.