One of the tricky elements of trust drafting is providing a means for dispute resolution far into the future. The attorney drafting the trust may specify which state's law should be used. In this recent case, identifying a state was not enough.

Dorothy and Howard Foster created a trust for their wealth management in California in 1989. In 1996, the trust was amended to name their sons, Stephen and Gary, as successor trustees. Howard died in 1997, Dorothy died in March 2013. But before she died, Dorothy executed a "Certificate of Trust" that named Stephen as the first successor trustee, Gary as his brother's successor. When she died Dorothy was a resident of Alabama.

The brothers started out as co-trustees until they got an opinion from an attorney stating that, based upon the Certificate of Trust, Stephen must be the sole trustee. Matters then went downhill.

In November 2013 Gary filed a complaint seeking an accounting of the trust. In May 2014 a memorandum of agreement by the brothers was filed in court, in which Stephen promised to keep Gary informed. The court issued a "Temporary Consent Order" restraining Stephen from making any trust disbursements without telling Gary about them. Stephen violated that order, and a trial was held in September 2015. Stephen was removed as trustee, Gary was named the new sole trustee, and a forensic accounting of the trust was ordered by a neutral firm. Eventually, the trial court ordered Stephen to pay Gary $244,080 as trustee and another $234,465 personally as proceeds from the sale of certain trust assets.

On appeal, Stephen asserted that the trust was to be governed by California law, where it was created, and as such Gary never had standing to bring any of these lawsuits in the first place! After a careful reading of the trust instrument, the Alabama Supreme Court noted that it "is to be construed according to California law." "Construed" is not the same as "governed by." Matters of trust administration, such as are here presented, are to be determined by Alabama law. The trial court's decision was affirmed.

There is a new message that the very wealthy are delivering to their children, a message heard more and more often. And it is a message that could just as well be delivered to the children of parents with somewhat more humble accumulations of assets.

To state it bluntly, the message is: Don't automatically assume, kids, that we are going to leave it all to you. Or: Though you may get it, it may be later rather than sooner--and with a few strings attached.

What are the concerns that have led many parents to reconsider their children's legacies? None are that unusual. One oft-expressed concern is that a child's inability to handle money or a freewheeling approach to spending is likely to mean that he or she will squander an inheritance. Another is that the child will use an inheritance to support a life-style that his or her parents find unacceptable. When an inheritance is substantial, sometimes parents feel that handing over a large sum will sap the child's ambition.

The most radical approach for the very rich is to leave their offspring with only a small percentage of the family wealth; the rest usually goes to charity. (The perfect amount to leave children, said Warren Buffett, is "enough money so that they would feel they could do anything, but not so much that they could do nothing.") But for the less wealthy, the concern is not how much the children will get but when they will get it.

The simplest solution is for parents to structure a child's inheritance by using a trust. By setting up a trust, and making specific provisions in the trust agreement, parents may be able to make the kind of arrangements that will put them at ease about the financial future of their children.

For example, the age at which the child receives his or her inheritance may be set forth in the agreement. While a bequest in a will becomes operative upon death, a trust agreement can specify that a child receive only income from the assets in the trust until the child is a certain age--25, 30 or older. Or, the agreement may specify that payments from the trust fund, along with trust income, be spread out over a number of years.

Language may be included in the trust agreement to allow a child to use trust funds for approved purposes; typically for "health, maintenance, welfare and education." On the opposite end of the spectrum, parents may want the funds to be untouched; some states allow the insertion in the trust agreement of what is known as a "spendthrift" clause, prohibiting the child from borrowing from the trust fund.

Sometimes parents establish "incentive trusts," which may match or double the income a child receives from his or her salary. The trust agreement also may provide that trust funds will be paid to a child only if he or she achieves a particular objective, such as obtaining a college or professional degree or holding a job for a certain number of years.

A trustee is responsible both for the investment of trust funds and for carrying out the provisions in the trust agreement. Naming a professional trustee, such as our institution, ensures not only professional management of trust funds but also can avoid putting a family member or friend in the uncomfortable position of dealing with a child who is frustrated by his or her parents' decision about an inheritance. An appointment with a trust officer will allow you to explore the many possibilities for the distribution of family assets with the help of a professional trustee.