The landscape of trusts and estates is changing rapidly. An increasing amount of this country's wealth and assets is now owned and operated within trusts and estates. We are entering an era in which tens of trillions of dollars of wealth will transfer to the next generation. As wealth grows and sophisticated estate and tax planning become more prevalent, not only will the amount of wealth transfer multiply, but the complexity of that wealth will as well.
Inevitably, with greater wealth and greater complexity comes greater potential for controversy. Trust and estates litigation has increased significantly in recent years, and is progressively shaping not only pre-death estate planning, but post-death estate administration. The volume of disputes has expanded, as have their breadth and complexity.
Trust and estates now consist of more varied and multifaceted asset classes, including interests in multilayered networks of closely held entities, intellectual property portfolios, digital assets, and special real estate asset classes such as shopping centers, mixed use developments, timberland, mineral and water rights, and resort properties.
As the footprint of trust and estates wealth grows, the ripple effect of decision-making within those trusts and estates has become more far-reaching. It affects employees, shareholders, officers and directors of day-to-day operating businesses, communities surrounding large real estate projects, and charitable beneficiaries such as major non-profit organizations and private foundations.
This process has become more challenging as the commercial realities of estate assets sometimes clash with the parameters of the underlying estate plan and the probate code. The result is ever-growing opportunities for individuals to mire trusts and estates in litigation, and subject well-meaning but unprepared trustees and family members to scrutiny.
With more at stake and greater exposure to litigation, the "friends and family" approach to administration and management is no longer adequate or appropriate for many trusts and estates. More than ever before, trusts and estates require specialized legal, tax, financial, and asset-specific advice on an ongoing basis, not only to avoid litigation, but also to remain legally compliant, productive and solvent. As a result, the importance of sophisticated, specialized advisors is critical.
The solution in many instances begins with the use of a neutral, professional fiduciary, either an individual or corporate entity. Estate plans are more frequently naming professional and corporate fiduciaries as trustees. Family members are more frequently engaging professional fiduciaries to assist in administration.
These fiduciaries in turn engage a network of attorneys and advisors who specialize in navigating the challenges facing trusts and estates. This approach ensures these trusts and estates are administered professionally, profitably, and in a legally compliant manner.
Invariably, controversy and litigation will continue to be a fixture of trust and estates administration. In many instances, the disputes are genuine and well-founded. Given the changing landscape, disputes can lead to healthy and much-needed developments in law and policy. But even where controversy can be avoided or resolved efficiently, the use of professional advisors can be of great benefit as well.
Submitted by Daniel Abbott, a partner at Seltzer Caplan McMahon Vitek