What Conditions Can You Legally Place on a Trust?

The grantor of a trust generally has the right to place conditions on what beneficiaries must do to begin receiving bequests or to continue receiving them, but the court will not enforce these conditions if they are illegal, unconscionable, or unfairly restrictive.

It is your choice how you distribute the assets of your estate. Wills and trusts are different in terms of how money gets from your estate or trust to the beneficiaries, but they operate on a similar principle, namely that you are giving money to family members, or someone else because you choose to do so.

A trust allows more flexibility in terms of how assets are distributed. A trust allows the grantor to create conditions on the inheritance. For example, a trust may indicate that the trustee only distribute funds for the benefit of a beneficiary to complete his or her education, to make a down payment on a home, or to start a business, etc. Conversely, a simple will can only make outright and immediate distribution to a beneficiary – no strings attached. A will can include a testamentary trust, meaning that the will creates the trust after the death of the testator, and the testamentary trust receives the assets it will hold only after going through the probate process. This type of trust does not contain the many benefits of a revocable trust created during the grantor’s lifetime. 

When is a Trust Funded?

The most common type of trust is a revocable trust, also called a living trust. A revocable trust should be funded during the grantor’s lifetime. The person who creates the trust is called the grantor. The person who has the authority to receive assets into the trust and distribute funds from the trust is called the trustee. The persons or entities entitled to receive assets from the trust are called the beneficiaries. Oftentimes, the grantor is also the initial trustee and beneficiary. It is most often the grantor and initial trustee that are funding the trust.

Funding is the process of placing assets in the trust. Funding the trust should be done with the guidance of an experienced estate planning attorney

Some trusts do not get funded during the grantor’s lifetime. A testamentary trust, which is a trust created by a will or other testamentary document, only comes into existence and gets funded after the death of the grantor. Where a testamentary trust exists, the will must still be probated and the assets must still go through the probate process. The testamentary trust is funded through this process. 

Sometimes, a grantor forgets to fund his or her revocable trust. If this happens, often a “pour-over Will” will distribute the assets to the trust. In this case, the will must be probated and the assets must go through the probate process. The beneficiary under this kind of will is the trust. This is not ideal, and a grantor should work with an experienced estate planning attorney to make sure the trust is funded during the grantor’s lifetime.

Precedent and Subsequent Conditions

You can set precedent conditions, which are requirements that the beneficiary must meet before they can start receiving money. A common example is that grandchildren can start receiving money from the trust after they graduate from high school; simply being at least 18 years old is not enough for them to access the money. A subsequent condition states that a beneficiary loses his or her right to trust assets if he or she violates the conditions of the trust.

Contact Kruse Law in St. Petersburg About Avoiding Drama With a Family Trust

A St. Petersburg trusts lawyer can help you ensure that your revocable trust meets legal requirements and does not cause preventable conflict within your family. Contact Kruse Law  in St. Petersburg, Florida to set up a consultation.