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Don’t overdo the “dead-hand controls” on your trust

On Behalf of | Sep 30, 2021 | Wills and Trusts | 0 comments

Trusts have become an increasingly useful financial tool for people who want to safely pass their wealth onto the next generation. So-called “conditional” trusts, which impose certain obligations on would-be beneficiaries to receive their funds, are particularly popular.

Be careful, however, if you decide to use a conditional trust. “Dead-hand controls” over the actions of the living can — if they run contrary to public policy — make a trust unenforceable.

How are conditional trusts commonly used?

The conditions imposed in trusts are as varied as the people who establish them, but one common example is a trust that’s tied to a beneficiary’s education or age. For example, you may want to motivate your heirs to be productive in life and stand on their own two feet. With that in mind, you can set up a trust so that it only pays out once your heirs either graduate college or turn 40 years of age.

That sort of thing is generally fine (although you may want to consider putting exceptions in there for an heir who gets sick or becomes disabled).

Here are the sort of overreaches that the courts have said go a step too far:

  • Forbidding your beneficiary from marrying
  • Forbidding your beneficiary from marrying someone of another race
  • Requiring your beneficiary to get divorced 
  • Requiring your beneficiary to destroy any property (including something that was yours prior to your death)
  • Limiting your beneficiary’s religious freedom
  • Requiring your beneficiary to do something illegal

Putting your estate plans together is a big deal — and the conditions you settle on a trust need to be carefully considered. It’s generally wisest to get some experienced guidance from the beginning of the process.