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Avoiding unenforceable conditions in conditional trusts

On Behalf of | Oct 20, 2022 | Estate Planning

If you want to leave money in a trust for a child or grandchild when they reach adulthood (or perhaps for one who already is an adult – at least legally), you have the right to place some conditions on when and for what purpose assets can be distributed to them by whomever you appoint as trustee.

Maybe you don’t want your child or grandchild to have access to too much money at one time. One way to avoid that is to designate that they can receive a certain amount or percentage every year beginning at a designated age.

If you have a child or grandchild who’s a young adult (or maybe even not so young) with a substance abuse issue, you likely don’t want to disinherit them. However, you don’t want them using the money in a way that will only harm them. You may want to stipulate that the beneficiary be in recovery for a specified period before they begin to receive any money and that it only be used for things like college.

You have every right to set up a conditional trust (sometimes called a spendthrift or incentive trust) to protect the assets you leave behind and help ensure they don’t end up doing a loved one more harm than good. However, not all conditions are enforceable under the law.

What kind of conditions are unenforceable?

It’s typically legal to place conditions that incentivize someone to do something that’s in their best interests – like going into recovery or finishing college (or other training that will help them become self-sufficient. However, some conditions cannot legally be enforced.

Among the conditions that can be challenged in court and likely ruled unenforceable include the following:

  • Any requirements to get married or divorced – or stipulations about whom someone can or can’t marry
  • Any conditions involving someone’s religion – or lack of one. This can include requiring someone to convert to a particular faith
  • Requirements that the beneficiary do anything illegal to get the inheritance

The first two are the most commonly tried – usually by people who think they’re doing the right thing. However, by having experienced legal guidance as you develop your trusts, you help ensure that you place needed safeguards on your assets but not by including stipulations that are unenforceable.