4 Ways to Help Trust Beneficiaries Feel Trusted
2. Empower Beneficiaries
When possible, include adult heirs in your client’s planning and empower them to make decisions. Being transparent about trust distributions and allowing beneficiaries some agency over the process can help them develop confidence and a sense of responsibility.
One way to accomplish this is through allowing them to serve as a co-fiduciary for the trust. The fiduciary roles of trustee and/or distribution advisor can often be filled by a beneficiary. Designating beneficiaries to serve in one of these roles shows faith in their ability to make some decisions for themselves. Drafting a trust that allows beneficiaries to share responsibility over trust decisions can go a long way in fostering supportive, transparent relationships. It also prepares them to have greater agency over their own financial life.
3. Educate Beneficiaries
After years of managing our children’s health, safety, education and lives, it can be hard to fully relinquish control — especially when a large sum of money is involved. But, for families of considerable means, preparing children for a potential wealth transfer is merely another important part of raising a family.
Instead of applying constraints passively through a legal document, help your clients to consider engaging future generations in financial literacy. Encourage them to spend time talking about their family’s values. Educate them on investing concepts and trust structures. Prepare them – appropriately and over time – for what is to come.
4. Give Beneficiaries Agency
Given a growing number of social and environmental issues, some beneficiaries feel increasingly compelled to move their capital into action, or at a minimum in alignment with their values, to support the kind of world they wish to see.
The strategies to make that change often exist across a spectrum — ranging from philanthropy to the highest possible returning investments — and beneficiaries with agency and excess capital can play a vital role in supporting these causes.
Philanthropically minded clients often ask if trusts can have charitable beneficiaries. They can, but how this works will depend on the language in the trust agreement. If clients are in the beginning of the estate planning process, including a charitable beneficiary in a trust is simple.
They also have the option of incorporating language giving the beneficiary the “power of appointment” to choose to give to charities either during lifetime or at death, or both. It is important to include this language into a trust document, as making philanthropic gifts from existing trusts can be more difficult or impossible.
Another way to build agency is to give beneficiaries a legal role as a trustee or investment direction advisor. Here, they can define the financial goals of the trust, hire advisors and sign the investment policy statement, while overseeing asset allocation and implementation.
Beneficiaries can allocate capital with the intent to foster not only financial returns but also social and environmental outcomes. This can include the ability to invest in impact investments, including catalytic strategies — investments that intentionally prioritize impact over return.
The Way Forward
Trust structures are often critical components to implementing a family’s legacy and financial plans, and they hold enormous value. The goal here is to illuminate the many ways that trusts can be constructed so clients can think critically and creatively about what serves them and their families in alignment with their values.
Strategies continue to evolve, and more families are reaching their desired outcomes of investment flexibility and beneficiary autonomy. The shifts to better align trusts with the needs of modern families can also help move our economy into greater alignment with the social and environmental solutions that the 21st century requires.
Jill Shipley is head of governance and education at AlTi Tiedemann Global.
