If you are using a trust as part of your estate plan, you can be as specific as you want. For example, you could create a trust saying that the funds have to be used for college tuition. The beneficiary would benefit greatly from essentially getting a free education, but they couldn’t use the money for other ventures or frivolous purchases.
People often create trusts like this when they’re worried about the decisions these beneficiaries will make with their money. They see the trust as a way to influence or control those spending habits so that the money is used wisely. But there is a potential problem with being so specific in a trust.
What if things change in the future?
The future is unpredictable. You may be writing a trust today with the understanding that your beneficiary will one day go to college. But what will that future actually look like?
For instance, say that the beneficiary decides they want to join the military. Does that mean they shouldn’t get the money from the trust? What if they start a business or take another professional course that doesn’t involve going to college? What if they get married and decide to be a stay-at-home parent? What if they suffer from a sickness or disease that makes it impossible for them to attend college?
These are all examples of situations in which you may want the beneficiary to be able to use the money, but they may be prohibited from doing so if the trust is too specific. An alternative could be to use a discretionary trust so that the trustee can make changes or alterations as necessary. Either way, it pays to understand all of the legal options you have when creating an estate plan.