How to Field Test Your Trust

How to Field Test Your Trust

Article posted in General on 2 July 2014| comments


Dan Felix takes a deeper dive into the idea of taking a trust for a test drive with practical ideas and suggestions for debugging and preventing future snags.

We've already talked about WHY to field test your trust: simply, it's about trying it out while you're still around to tweak it.    Here's the post and article on that.

And tweaking needs to be done:  That's a reflection on the realities of life, not a criticism of the designers. EVERY TIME WE'VE FIELD-TESTED A TRUST, WE FOUND SOMETHING THAT HAD TO BE CHANGED!

The question now is HOW!

It involves looking at what's been created and how it will work.

That's not as easy as it sounds.

It can involve a bit of role play - trying out some unpleasant scenarios and having the successors and advisors play out what would happen.   Maybe the rest of the family will eventually be involved.

It can utilize a separate facilitator - because all the trust participants will be playing their own roles.

It can take some patience and some time and money - and it could be worth it.  After all, your trust will be taking care of you when you can't - and your family when you're not there.  Shouldn't you have the confidence that it works?

Field Testing for Success – Details on “How To”

Use a separate, professional facilitator!

Here are some of the key consideration to the field test process.

The field test begins with a trust summary, that is, a translation of the trust into lay terms. Particular attention should be given to the both the beneficiaries’ roles as well as the functioning of the fiduciaries: their responsibilities, limitations and criteria for decision-making. These should be shared with the fiduciaries as well as with the trust creator – and in due time, with the rest of the family. Collaboration benefits from everyone understanding the foundation of what the trust provides.

Generally, the first field test should involve the trust creator, the fiduciaries, and the trust & estate attorney. Consider including others particularly close, such as the trust creator’s spouse, the corporate attorney and perhaps others deeply connected with the transition of the business.

With this cast assembled – including a separate facilitator – cover a prearranged agenda including immersion in several carefully crafted scenarios, around key events, such as disability and death of the trust creator. He may suggest some other scenarios based on what he is most concerned about. Take nothing for granted. Consider the places between the substantive; for example, the process of how the fiduciary is notified, assumes responsibilities and communicates with the stakeholders. See how the process and outcome of these scenarios compare with his expectations. Confirm also that the playing out will provide clarity as well as comfort to the family and the business.

The field test may also role play on how the fiduciary deals with the each scenario and then at least roughing a flow chart of consequences. Care should be given to expose the multiple tiers in which the fiduciary is working: taking care of the substantive issues, coordinating with other fiduciaries and professionals, and communicating with family members, to name the big three.

The next part of the scenario is to practice how decisions will be made, especially where the various trust stakeholders have different, if not opposing wishes. A closely related, if separate part of decision making, is communicating the process and ultimate decision to the family and other stakeholders. While the decision may belong to one alone, that fiduciary may be well advised to gain acceptance from those who are effected by the decision - and who have the power to file a claim.

Time should be allowed in the field test for all to ask questions and otherwise clarify likely facts as well as to explore the boundaries of both the law generally and the document specifically. This process should serve as a check against the wish list of the trust creator. The facilitator and others should be looking for substantive and other fit, and should provide a safe environment to allow any of the stakeholders to raise questions and concerns. These questions and concerns may be the signs of some to further improve the trust as designed, suggesting that modifications could be considered.

Following those modifications, the trust creator or one of the advisors can schedule a second field test for an appropriate later time. The second field test should involve the same cast PLUS all the trusted advisors. This will give the trust creator confidence that the team works well together, and will help expose additional communication and governance issues.

And again, most importantly, this will allow the trust creator to confirm his expectations are understood, and that he understands their consequences. The facilitator should again work in advance of the actual field test to make sure that the team is set up for success.

Following the resulting modifications, the third field test cast is expanded to include the beneficiaries. The participation of troubled, troubling or incompetent beneficiaries should be considered on a case-by-case basis.

The separate facilitator adds the additional benefit of allowing better observation of how the family – and the advisors - are taking it in.

The goal is to not only give the trust creator confidence in the evolved plan and team, but also to help invest the family in that plan and team! The more invested the family, the more likely they’ll successfully get through the transition - and less likely to break apart or litigate!

And accomplishing that goal - enhancing family harmony and the execution of a successful plan while reducing risk - is a wonderful win-win result!

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