People in California may have heard that the late actor Philip Seymour Hoffman declined to set up any trusts for his three children, saying he didn’t want them to be “trust fund kids.” Recently, the musician Sting said essentially the same thing. With this recent negative celebrity press for trusts, it might appear to a casual onlooker that wanting financial security for your children is somehow a bad thing. Sure, most people would want to avoid enabling a stereotype “trust fund kid,” but just because a child or heir has a little financial security or jumpstart is by no means a sentence condemning them to a lifetime of coddling and laziness.
In fact, a trust itself is simply a tool designed to help people keep more of their hard-earned money for themselves, their heirs, and even their favorite charity. In many ways, a trust can be a useful extension or alternative to a will, and when used properly it can provide a level of protection from unnecessary taxation that a simple will may not. It also allows for more control than people might initially believe; most revocable trusts can be altered or revoked at any time if the testator so desires.
Trusts can also control how and when the money is to be distributed and spent, giving the testator a means to ensure that heirs follow their rules even after the testator’s death. For example, a trust could be conditioned upon graduation from college, thereby encouraging heirs to accomplish things in their own life instead of becoming the pampered stereotypes Hoffman dismissed.
People who can afford to help their heirs with financial support or a gift that will otherwise help them in their life shouldn’t listen too closely to these celebrities. While they may be brilliant in their own right, they are probably not the best sources of financial or legal advice.
Source: Forbes “Philip Seymour Hoffman and Sting Highlight Five Myths About Trusts,” Danielle and Andy Mayoras, July 28, 2014