Tuesday, June 16, 2020

What I am** and should I be the appointor?

Today’s post considers the above-mentioned topic in a ‘vidcast’.

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below.

The Richstar case has featured in many previous posts. As usual, if you would like access to those posts, please contact me.

In terms then of who should be an appointor, despite what Richstar says, which was that the appointor is highly critically important from an asset protection perspective, that’s not actually the law. Richstar has been rebutted. Therefore, we would argue that in the ordinary course, it does not matter who the appointor is.

Now as with all trust areas, I would argue there is an exception to that general rule.

The exception to the general rule is do not set your client up to fail unnecessarily.

Therefore, you want to have at least two other things on your list when you’re looking at an appointor I would argue at the bare minimum.

Point number 1, make sure that embedded into the trust instrument, there is an automatic disqualification of the appointor if they commit any act that allows the court to look at the act. By crafting the provisions that way, you do a couple of things.

First, it sets the rules of the game before the trust is even started. It’s therefore almost impossible for anyone to argue that that was some sort of inappropriate strategy because it was there from the very start.

The second thing is that if any court comes in, the bankruptcy court, the family court, etc., before they come in, the deed self-executes and makes sure that the appointor is automatically removed.

The next point is just thinking about who you actually want as your appointor. Maybe it isn't the smartest thing to have the at-risk individual. Not because of itself is going to cause the trust assets to be exposed, but why even raise a question when you can actually avoid the issue.

The one thing I would flag on that is that having a non-at-risk person as appointor can be a lot easier said than done. The appointor has the ability to hire and fire the trustee in its complete discretion.

The person needs to be someone you can completely trust in order to deliver that role in a way that actually is going to align with what the people behind the trust are actually striving for.

As always thanks to the Television Education Network for the video content here.

** for the trainspotters, the title here is riffed from the Edie Brickell song ‘What I am’.