For many New Yorkers, the term ‘trust‘ continues to invoke visions of the super wealthy. Similarly, terms like “trust fund baby” are used to refer to spoiled, rich individuals who do no work on their own and simply live off their parents savings. The connotation is always negative.
As our estate planning attorneys often explain, however, trusts are critical tools for families of all income levels. And there is no reason why children who benefit from the trust suddenly become slovenly or without their own motivations. For one thing, many trusts are not large enough to offer income that can last a lifetime. Even when the trust is large, conditions can be placed on child-beneficiaries which can help prevent them from relying solely on an unlimited stream of income.
Incentivizing a Trust in New York
A helpful Tribune article last week discussed some of the ways that trusts can be created to offer incentives to beneficiaries. The basic idea is simple–add “strings” so that the beneficiaries of the trust only receive money if they meet various conditions. A range of conditions can be added, but the most common relate to promoting responsible achievement in the next generations–requiring graduation from college or holding a steady job. By limiting the child from any proceeds unless they meet these requirements, one can flip the script, not only avoiding the trap of the trust acting as a de-motivator, but making the trust actually act as motivation to succeed.
These trust condition can be very helpful in tailoring an estate plan to one’s exact specifications. However, they come with many pitfalls. When not crafted carefully, the conditions may unintentionally become far too restrictive or too expansive, failing to meet the intended goal. For example, requiring completion of college before receiving trust benefits may seem straightforward. But, what exactly counts as receiving a college degree? A bachelor’s degree? What about an associate’s degree? Does completion of a trade school count? The conditions need to be specific and clear.
In addition, there are some limits to trust conditions–both legal and practical. In general, conditions that violate the general public good can be invalidated. For example, requiring a child to divorce his wife before receiving anything may not hold up because the public supports the general goal of preserving marriages.
Get Legal Help
As always, do not attempt to craft these arrangements on your own. Contact an experienced New York estate planning lawyer who can explain the many options available to you and ensure the plan is drafted appropriately.