Clients have the right to spell out in detail upon what terms and when their children will receive their money and who has the responsibility of making decisions for them. Clients can make a gift to charity and request that it be used to establish a scholarship for a specific class of individuals. Additionally, clients can even make provisions for payments to grandchildren that will be effective many years following his death.
Be aware, however, that if trust provisions attempt to unreasonably modify or control the lives of intended beneficiaries, these gifts may not be legally enforceable, depending on the laws of the state, how the courts interpret public policy, and the degree of control.
— (Related on ThinkAdvisor: Estate Planning: The Family Limited Partnership Strategy)
Some questionable trust provisions include a gift to a public college to be used only for scholarships for a specific religious group; a gift to a child but only if he renounces all contact with the cult with which he is presently associated; and a gift in trust for a grandchild but only if she marries someone of the grantor’s faith (compare that with a gift to a grandchild who is being raised in a different faith from that of the grantor, providing that the grandchild take at least one college course on the grantor’s religion).
If clients have strong feelings about a particular provision that he or she would like to place in trust, practitioners should strongly recommend that said provisions be researched for ease of use and applicability. The practitioner needs to understand the validity and enforceability of such provision in the governing law state of the trust.
Some clients have specific ideas and goals that go beyond these situations. Many of these ideas find their way into trusts, even though their enforcement may, in certain instances, be quite difficult. For example, leaving money to children or grandchildren, providing they do not smoke or use drugs or leave money to persons depending on their marital status. Many people may want to provide for a son-in-law or daughter-in-law, for example, especially if there has been a long and happy marriage, however, not if the son-in-law or daughter-in-law is not living with and married to their child at the time the gift becomes effective. In that case, a husband and wife could make a gift in trust to their daughter-in-law, providing that she is married to and living with their son when the second of them dies.
As a further precaution, the trust should contain a spendthrift provision, which prohibits the assignment of any interest or distributions from the trust to creditors of the beneficiary. That means a beneficiary could not go to Las Vegas and use his or interest in a trust as collateral. In most states, this will prevent general creditors from reaching any of the trust assets, and, in some states, it can bar a beneficiary’s spouse from attacking the trust assets or claiming that they are marital property and therefore subject to the spouse’s claim against the trust beneficiary’s assets.
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