Access To Assets In Testamentary Trust (Powers Of Appointment)

Unfortunately, there arevery few options that would enable you to leave the trust assets to yourhusband if he survives you.   Trusts areoften used to control one’s assets after death to restrict use of the funds forselected individuals or limited purposes. It is particularly common for trusts to be established for the life of achild with the balance distributed to his or her descendants after the child’sdeath.  This assures assets stay in thebloodline and avoid distribution to an “in-law” who may re-marry or leave fundsto children from a different relationship.

Some trusts include a“power of appointment” provision that enables the beneficiary to select theremainder beneficiary after his or her death. Sometimes this power is broad (a “general power of appointment”) thatpermits the lifetime beneficiary to designate anyone as the remainderbeneficiary.  Other times this power isrestricted (a “limited power of appointment”) that defines the class of peoplefrom which the remainder beneficiary can be selected.  In your case it is important to determine ifa power of appointment is included in the trust established by your parents and,if so, whether it permits a distribution to your spouse.  

It may also be possibleto modify the trust with consent of all the remainder beneficiaries. The remainderbeneficiaries would need to be over age 18 and should have independentrepresentation before agreeing to waive their rights to the trust.  This result is generally difficult toaccomplish and may be resisted by the Trustee charged with effectuating theterms of the trust outlined by the Grantor. 

Another alternative is toexplore the possibility of increasing or accelerating the distributions fromthe trust so you acquire more of the assets to use or dispose as you wish.  Many trusts authorize the Trustee to exercisediscretion to make distributions to the lifetime beneficiary for health,education, maintenance or support.  Thisstandard can be interpreted broadly or narrowly depending on the Trustee.  Trustees, however, must proceed cautiously asthe Trustee has a fiduciary duty to balance the interests of the lifetime andremainder beneficiaries.  This generallydiscourages Trustees from depleting the trust in favor of the lifetimebeneficiary due to claims that could be asserted by the remainder beneficiariesalleging the trust assets were not adequately preserved. 

The terms of every trust are different and must be reviewed carefully.  As a result, it is important to seek the advice of an experienced trust and estate attorney to explain the provisions of the trust document and outline your rights and options.

Originally appeared on NJBIZ Biz Brain December 2019