If you are writing a trust as part of your estate plan, you may be thinking about making it very specific, so that it accomplishes a certain goal. For instance, say that you went to college when you were younger and you feel that it was a transformative experience. You want all of your grandchildren to be able to afford to go to college, as well. So you set up a trust that can be used to cover the cost of college tuition, room and board, and books and other supplies.
The benefit of doing this is that you get to accomplish your specific goal with the money that you’re leaving to the next generation. But are there any downsides that you want to be aware of?
The future is unpredictable
One of the biggest downsides is just that you can’t predict exactly what the future holds. There’s a chance that a trust you write today may not apply in the way that you assume in the future.
For example, say that you create a trust that very specifically says a beneficiary can only use the money for college. But that person wants to go to trade school. Does that count as a college expense? Or maybe they want to join the military. Does that mean they don’t get to use the money from the trust at all?
It’s not always that the beneficiary doesn’t make the choices you anticipate. They may not be able to. Say that they suffer from an injury, an illness or a disability that keeps them from attending college. Would you want them to be able to use the money from the trust to pay for their care and other necessary expenses?
Keeping this in mind, it may be wise to give the trustee a bit more discretion and the ability to authorize payments for multiple reasons. No matter how you decide to use a trust, though, just be sure you know what legal steps to take to set it up.