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Charting Futures For More Than 30 Years

What limitations can you set in a trust?

If you have established a trust, you will want to make sure it works in the manner you intend it to. Simply funding it will not accomplish this goal. Rather, you must include certain limitations in your trust’s provisions. By doing so, you will improve the odds that your beneficiaries will use the property in your trust responsibly.

Limitations on distributions

You may not want your beneficiaries to receive their inheritances outright after you die. Rather, you may want their inheritances to pay out as distributions at certain ages – such as 25, 30 and 35 – or after certain life events. For this to happen, though, you must include language in your trust that sets forth staggered distributions. You may also want to include a clause that provides for your beneficiaries between these distributions, especially if they need assistance with major expenses – such as for education or for a wedding – or certain living costs.

Limitations on use

If some of your beneficiaries are minors, or if some have financial issues, you may want to set limitations on their access to and use of trust funds. You can accomplish this by adding a spendthrift clause to your trust. This clause will prevent your beneficiaries from blowing through their inheritances all at once, as well as from using future trust distributions as collateral. And if your beneficiaries owe money to creditors, a spendthrift clause will prevent them from touching the property in your trust.

Limitations on contests

One or more of your beneficiaries may disagree with the terms you set forth in your trust. If they feel these are unfair to them, they may try to contest its validity. Adding a no-contest clause to your trust, though, will likely deter them from doing so. This is because a no-contest clause will decree that, if your beneficiary’s contest fails, they will lose out on their inheritance.

By setting limitations in your trust, you can ensure the preservation of your assets after your lifetime. To make sure these limitations are binding, you will want to draft or review them with an estate planning attorney.