A primary aspect of estate planning is helping to shape the lives of loved ones, family members, and charitable causes you care about after you have passed by providing them with security, stability, and the funds and/or property that will be useful to them in fulfilling their purpose. It is a natural impulse to hope that those parties actually use the property you pass on to them that fits within your goals for them.
For example, if you gift your granddaughter $100,000 in your will in the hopes she will use it to fund a college education, the hope is that she will not blow it a weekend at the casino or give it away to a sleazy boyfriend who needs it to take his amateur band on a world tour. Similarly, one hopes that donating a boat to a humanitarian organization to serve medical needs in the third world will not mean the CEO’s son gets a new boat.
Many people hope to avoid these unintended and unfortunate outcomes by placing conditions in their will – e.g. “$100,000 to my granddaughter Raphaelle Jones, to be used only for attending UCLA’s business school” – but oftentimes these provisions are unenforceable. That said, a living or testamentary trust can achieve these purposes.
Why a Will Is Not the Best Way to Make Conditional Gifts
You are free to write anything you would like in your will regarding how beneficiaries should use the gifts you bequeath them, but the problem lies with enforcing those promises.
While Raphaelle may read the words directed towards her in the will regarding her education, and she may indeed want to honor those wishes, there simply is no structure in place by which anyone can prevent her from using the $100,000 however she’d like. The probate court that oversees the administration of your estate is not in a position to monitor how beneficiaries use gifts they receive. Furthermore, this is not the job of the personal representative or executor of the will either.
In short, if Raphaelle does decide to use the $100,000 to fund her boyfriend’s world tour, there is no one to stop her from doing so: at that point, it’s her money.
Directing Your Gifts to Intended Uses With a Living or Testamentary Trust
A better option is to create a trust which dictates how you would like funds devoted towards a beneficiary to be spent. With a trust, you will appoint a trustee who will: 1) actually be in possession of the property and funds in the trust; and 2) only spend those funds on behalf of the trust beneficiary in the way that you have directed the trustee to do so when you created the trust.
A trust can be a living trust, which can take effect while you are alive, or a testamentary trust, which takes effect when you pass on in the same way as a will. You can create a trust for any number of purposes, including education, caring for a special needs individual, charitable causes, and so on.
In addition, a trust has the added benefit of bypassing the probate process altogether and the property can be shielded from your beneficiaries’ creditors in some cases.
Update Your Estate Planning With a Pasadena Estate Planning Attorney
Estate planning and probate attorney Christopher B. Johnson, located in Pasadena, California, has years of experience in all aspects of estate planning, and works with clients from all walks of life to create estate planning tools that reflect their needs and those of their beneficiaries. To request an immediate consultation, contact him today at (877) 755-9178.