I have been given the opportunity to represent a trust regarding the possible conversion of the trust to a unitrust.
In California, as elsewhere I suspect, unitrusts are used to take advantage of federal tax laws related to the powers of trustees to invest the trust funds. There are other reasons for unitrusts as well.
In my earlier post, I talked about the "essence of estate planning." I defined this essence as carrying out the intentions of the clients, whether they are the settlors, the beneficiaries, or the trustees. What if your client is the trust itself? What does that mean? How do you determine what the best interests of the trust are? Chances are the beneficiaries may be at odds, as income and principle beneficiaries often are.
Probably the most challenging thing about estate planning is walking the fine line between carrying out the intentions of the trustor and minimizing potential conflict with the beneficiaries. The system has many options for addressing this after the fact. Conversion of a traditional net income trust to a non-charitable unitrust is one of those options.
Again, keep your ears open. Listen to all the parties. What are they saying? What is it that they want?
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