Purposeful Trusts

Purposeful Trusts

Some trust grantors have begun to question the advisability of traditional “carrot and stick“ approaches to controlling heirs’ behavior, as it may turn later heirs against the trustee or even the grantor. This has led to the development of a relatively new concept in trust planning called purposeful trusts. A purpose trust is a type of trust which has no beneficiaries, but instead exists for advancing various non-charitable purposes. In most jurisdictions, such trusts are generally not enforceable; however, a few states have enacted legislation specifically to promote the use of non-charitable purpose trusts.

Through a purposeful trust, the grantor client may stamp his or her fingerprint and voice on the trust document in a very personalized way, combatting the negative psychological implications of “I don’t trust you.” An example of a purposeful trust clause would be one that encourages entrepreneurship by providing that a portion of trust funds be allocated to create a family bank that can be used by heirs for qualifying loans. The goal of a purposeful trust should be to turn the planning process into a positive experience, with the results projecting the grantor’s life into the lives of the beneficiaries for generations.

Liberty Street Advisory Group refers to the separate entities, Liberty Street Law, Liberty Street Capital and Trust & Estate Stewards. None of these entities or persons furnish actuarial, accounting or comprehensive tax advice. Liberty Street Law is a law firm, and does not provide investment management, or any financially-related services. Liberty Street Capital, is a limited liability company registered as an investment advisor in Georgia and other locations. Trust & Estate Stewards is a limited liability company. Past results are not a guarantee of future performance.