California law allows trusts to be created “for any purpose that is not illegal or against public policy.” That very broad statement means you are free to create a trust to benefit nearly anyone and to accomplish almost any goal. Your trust does not need to include a specific statement of purpose or intent—but putting one in can be a huge help down the road.
The Trouble With Trusts That Have an Indefinite or General Purpose
Trusts can be perfectly valid without a purpose statement. California law says “A trust created for an indefinite or general purpose is not invalid for that reason if it can be determined with reasonable certainty that a particular use of the trust property comes within that purpose.”
The problem is that a trust lacking a statement of purpose or intent leaves a lot of room for arguments between the trustee, beneficiaries, and others who think they should be beneficiaries. Resolving those disagreements and determining whether a given use of the trust property is acceptable requires lawyers, courts, and potentially a lot of stress and expense.
Lack of Guidance for Trustees
The California probate code says trustees must administer trusts in ways that “aim to accomplish the purposes of the trust as determined from the trust instrument.” But when a trust does not specify any purpose, who is to say whether the trustee is administering it properly?
For example, the trustee might decide to sell a piece of trust property, thinking it’s the right thing to do, only to have the beneficiary question the move. The disagreement could escalate and require court involvement, where things quickly get expensive for all concerned. A fight like this is not what you wanted when you created the trust, and it might have been avoided if the trust included a clear purpose statement to guide the trustee.
Modifying or Terminating the Trust
According to California law, a trust can be modified or terminated if all the beneficiaries consent and if the court determines that the reason for modifying it outweighs the need to accomplish the material purpose of the trust.
Again, if the trust does not specify a purpose, then it will be harder (and therefore more expensive) to determine whether modification or termination should be allowed.
How to Express Your Trust’s Purpose or Intent
In the Trust Document Itself
Your trust can include a section outlining your reasons for creating the trust and for allocating property a certain way. Such an explanation can guide the trustee and give your beneficiaries a good understanding of why you’re giving certain property to specific people.
For example, you could explain that you are leaving $1 million in cash to your grandson, but not until he reaches the age of 30 and only if he has a full-time job by then. This specific instruction tells everyone what the grandson needs to do to inherit the money and tells the trustee not to give the money unless the grandson fulfills every condition.
Letter of Intent or Letter of Instruction
This is an informal supplement to your estate plan that offers detailed information to your trustee. The letter is separate from your trust and can include:
- Specific instructions on how certain pieces of property should be handled
- Messages to loved ones to be read after your death
- Instructions on the care of pets
- Locations of important documents like tax returns, birth certificates, and military records
- Contact information for your lawyer, CPA, banker, and anyone else involved in your affairs
The above information can change before your death, so having it listed in a separate letter makes it easier to edit over time. Plus, you won’t have to pay to amend the letter as you would with a formal estate planning document.
Get Advice on Preparing Your Trust
At the Law Office of Janet L. Brewer, we have over 30 years of experience helping Californians create and administer trusts. We can help you clarify your trust’s purpose to avoid complications down the line.
To get started, call 650-325-8276 or contact us online anytime. We have offices in Palo Alto and Los Altos for your convenience.
