When clients talk about estate planning, the conversation often centers on big-picture decisions: who inherits the family wealth, whether children receive lump sums or staggered distributions and which family members are entrusted to carry out their wishes.
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But according to Cheri Stein, a partner and senior trust officer at audit, tax and advisory firm Plante Moran, the devil is often in the details.
Effective trust drafting accounts for the smaller, often overlooked elements that can create legal headaches, trigger unexpected taxes and even spark family conflict, Stein said. For financial advisors guiding clients through the complexities of wealth transfer, understanding these pitfalls is essential.
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Vague distribution language that ties trustees’ hands
One of the most common challenges Stein sees arises from unclear or inconsistent language around trust distributions, particularly when standard provisions are customized or additional clauses are layered in.
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While customization is often meant to reflect a client’s unique wishes, it can inadvertently introduce ambiguity that leaves trustees uncertain about how to carry out those instructions.
Distribution language needs to strike a careful balance between granting trustees enough discretion to adapt to changing financial conditions and clearly expressing the client’s intent.
Economic shifts, such as rising or falling interest rates, can materially change how income and principal are generated, making rigid or poorly aligned language especially problematic. Stein said that defining key terms, including what constitutes income versus principal, and ensuring consistency throughout the document can help avoid confusion, disputes and costly legal intervention.
Disclosure rules that backfire on beneficiaries
Another common pitfall is failing to fully anticipate how beneficiary disclosure rules will play out in practice. In many cases, clients underestimate how much information trustees are legally required to share, particularly for irrevocable trusts and plans that span multiple generations.
“The law often requires a beneficiary of a trust to know that the trust exists and then get copies of all of the accounting of what happens in the trust,” Stein said.
Failing to meet those disclosure obligations can expose trustees to fiduciary liability and invite legal challenges. But full transparency can also introduce its own complications, especially when beneficiaries are young or financially inexperienced.
“It becomes a little problematic when you’re doing estate planning, and you set up this $5 million trust for your kid who’s 19 and trying to get motivated in college to go and have a career, and then they find out there’s a $5 or $10 or $15 million trust for them,” Stein said.
Advisors can help clients navigate that tension by thinking carefully about timing, communication strategies and trust structures that balance legal compliance with behavioral realities.
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Math that looks good on paper but doesn’t compute in the real world
Even carefully drafted trusts can run into trouble when complex calculations collide with real-world administration. Stein said she frequently sees problems caused by circular references, overly complicated formulas and reliance on illiquid or hard-to-value assets, all of which can leave trustees struggling to carry out required distributions.
In some cases, trusts attempt to tie distributions to asset values that are difficult to determine in real time, such as real estate, closely held business interests or alternative investments. In others, formulas require recalculations based on lagging indicators like inflation adjustments, creating delays and uncertainty.
“When you’re drafting it, or the attorneys drafting it, they’re not thinking about the actual administration of it,” Stein said. “So you go to figure out what money needs to go to what different place, and the math doesn’t work, and all of a sudden you’ve got a mess on your hands.”
Funding decisions that lead to costly tax surprises
Tax consequences are another area where seemingly small drafting choices can have an outsize financial impact, particularly when it comes to how trusts are funded after death.
Stein said the decision between using a pecuniary formula, which directs a fixed dollar amount into a trust, and a fractional formula, which funds trusts based on percentages of estate value, can dramatically affect a family’s tax bill.
In rising markets, fractional formulas can unintentionally trigger capital gains taxes as appreciated assets are sold or reallocated to meet distribution requirements. Stein recalled cases in which estates faced unexpected tax liabilities simply to carry out funding instructions.
“We saw a client pass away … when the market was way down, and then we saw the market really go up over the next couple of months,” she said. “Then you’re stuck paying this capital gain just to fund the estate.”
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Ill-advised trustee selection
Choosing a trustee is one of the most consequential decisions in any estate plan, and one that clients often underestimate.
“The first time you’re asked to be a trustee, it’s a little bit of an honor,” Stein said. “And then you realize so much of it is just an administrative nightmare, and it’s a thankless job.”
Naming a family member can introduce emotional and logistical complications, particularly when siblings have unequal financial skills, strained relationships or demanding careers. At the same time, while professional trustees bring experience, structure and regulatory oversight, their services come at a cost that some families are reluctant to absorb.
Financial advisors are frequently caught in the middle, Stein noted, with clients asking them to step into the trustee role.
“You’ll find a big dichotomy of people who would say, ‘Yeah, I’ll do it.’ And maybe they are good at it, but they probably don’t know all the steps. Or others who are like, ‘Wow, I see the risk of that, and I do not want to be the trustee,'” Stein said.
Advisors who understand the scope of trustee responsibilities — including asset custody, regulatory compliance and fiduciary risk — can help clients evaluate whether a family member, professional trustee or hybrid arrangement is most likely to serve both the estate and family dynamics over the long term.
Skipping a personal property list
Even seemingly minor items can spark major family conflicts. One common oversight is failing to create a personal property list.
“It’s not usually the $10,000 gold and diamond ring that people are arguing about. Sometimes it’s grandma’s cookie jar, where every one of those grandkids who walked into grandma’s house went immediately to the cookie jar,” she said. “[They] spent their whole life eating cookies out of it, and suddenly everyone wants it. So having a personal property list that shows what’s going to go to people can avoid a lot of sibling and family fights after someone passes away.”
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Why advisors matter in trust planning
Drafting an effective trust is as much about execution as it is about design. Advisors who get involved early and understand how legal structures interact with real-world finances and family dynamics can help clients avoid costly missteps and unintended consequences.
That role often extends beyond technical expertise into helping families navigate emotionally charged decisions with clarity and confidence.
For Plante Moran’s wealth management clients, Stein said one of the most valuable tools that the firm provides is a one-page flow chart that takes the inch-thick binder of documents and breaks it down into a simple-to-understand graphic.
That kind of practical framing, she added, can turn abstract planning into actionable guidance, helping clients ensure their intentions translate into outcomes.
