Special terms and conditions of trust: Overview, definition, and example
What are special terms and conditions of trust?
Special terms and conditions of trust refer to customized provisions included in a trust agreement that address specific needs, circumstances, or intentions of the trust creator (settlor) and beneficiaries. These terms go beyond standard provisions, allowing the trust to accommodate unique situations or requirements, such as distribution rules, beneficiary restrictions, or asset management preferences.
For example, a trust might include a special condition that funds can only be used for educational purposes until the beneficiary reaches the age of 25.
Why are special terms and conditions of trust important?
Special terms and conditions of trust are important because they provide flexibility and specificity, ensuring that the trust operates according to the unique goals of the settlor. These terms allow the trust to address complex family dynamics, safeguard assets, or fulfill philanthropic intentions while maintaining legal and financial integrity.
For trustees, clear special terms provide guidance on how to manage and distribute trust assets. For beneficiaries, these terms clarify their rights, responsibilities, and entitlements under the trust.
Understanding special terms and conditions of trust through an example
Imagine a parent establishes a trust for their children with a special condition that distributions can only be made for education, healthcare, and living expenses until each child turns 30. This ensures that the trust supports the children’s needs while encouraging financial independence as they mature.
In another example, a charitable trust includes a special term requiring that 10% of its annual income must be donated to a specific nonprofit organization. This condition ensures that the trust fulfills the settlor’s philanthropic intentions consistently over time.
An example of a special terms and conditions of trust clause
Here’s how a special terms and conditions clause might appear in a trust agreement:
“The Trustee shall distribute trust assets solely for the purposes specified herein, including but not limited to [Insert Purpose, e.g., educational expenses or medical care]. No distribution shall be made for any other purpose without the prior written consent of all beneficiaries or as directed by a court of competent jurisdiction.”
Conclusion
Special terms and conditions of trust provide tailored guidance for the management and distribution of trust assets, ensuring that the settlor’s unique goals and intentions are honored.
By including clear special terms in a trust agreement, settlors can address specific concerns, protect assets, and support beneficiaries or causes in ways that align with their vision, while also providing clarity and direction for trustees.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.