We Have A Trust… I Think?

When we sit down with new clients, it’s not uncommon to hear:

“I think we have a trust. I’m not really sure.”

“We signed something years ago. I don’t remember what it does.”

“Does a will count?”

The truth is, many families have some form of planning documents (including trusts), but very few have trusts that are properly structured, up to date, and actually doing what they’re supposed to do. In short, the trust may exist—but not in a meaningful way.

The “I Love You” Plan Isn’t a Plan

I like to refer to some of these well-meaning but poorly executed plans as “I love you” plans. Essentially, the documents say, “If you go first, I get it. If I go first, you get it. If it’s both of us, the kids get it.”

The intent is noble, but they often set up the family for dysfunction, as large balance sheets can bring out unpredictable behavior. Here are a few scenarios I’ve seen repeatedly where “I Love You” plans produced the opposite result:

A widow gets remarried with all assets entering the marriage in her name, not in trust. Fast forward, and her kids get completely disinherited because her new spouse outlived her and received everything in his name.

A family with a net worth over $10M had a tragic accident, taking the lives of both mom and dad far too soon. The kids were in their early 20’s and received the full estate at once with no restrictions. You have to believe this wasn’t mom and dad’s intent, but their estate documents were 10 years old and drawn up when they were worth closer $1M.

A wife owned a business with another partner worth about $15M. She passed unexpectedly with no buy-sell agreements in place. Her husband became the defacto new partner with zero experience, and the business did not have the liquidity to buy him out at a fair value.

We’ve seen decades of financial progress undone because the plan didn’t include guardrails. Either the family wasn’t prompted on these questions, or perhaps they decided not to face them head-on. Either way, these gaps have real consequences.

So What Can You Do?

Short of spending decades helping families design and implement their trusts…. You need to have a team in your corner who can walk you through these questions as your financial world grows. The bigger the balance sheet, the larger the consequences of planning get (for better or worse).

For decades, we have dedicated ourselves to assisting families with $5M-$100M in assets, bridging the divide between their desires for their family and the specifics of their financial plans.

We call this a Fully Integrated Approach, which aims to give you an advocate capable of coordinating your entire multi-disciplinary financial team from tax planning to estates to private investments and beyond.

If you don’t have anyone leading your family through this kind of process, we’re here to help. Welcome to Fully Integrated Financial Planning the Napier way.

Disclaimer: The information presented in this newsletter is the opinion of Napier and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources but no liability is accepted for any inaccuracies. This is for information purposes and should not be construed as an investment recommendation. Past performance is no guarantee of future performance. Napier Financial is an investment adviser registered with the U.S. Securities and Exchange Commission.