The question of whether a trust can include distribution conditions tied to global events is increasingly relevant in our interconnected and often unpredictable world, and the answer, thankfully, is generally yes, with careful drafting and consideration of legal limitations.
What are “Trigger Events” in Estate Planning?
Estate planning isn’t simply about *when* assets pass to beneficiaries, but *under what circumstances*. These circumstances can be quite specific, and increasingly, clients are considering external factors—global events—as triggers for distributions. For example, a trust might specify increased distributions if a major pandemic occurs, a certain political instability level is reached in a specific country relevant to a beneficiary, or even a significant shift in global financial markets. Approximately 65% of estate planning attorneys report a rise in inquiries regarding contingency planning for unforeseen global events in the last five years. However, these conditions must be clearly defined and not be against public policy – which is a complex area of the law.
How Do You Draft Contingency Clauses for Global Events?
Drafting these clauses requires precision. Vague language like “in the event of a global crisis” is unlikely to hold up in court. Instead, use specific, objectively verifiable triggers. For instance, instead of “global pandemic,” specify “a declaration of a Public Health Emergency of International Concern by the World Health Organization.” Or, instead of “political instability,” define it as “a civil unrest index exceeding a certain threshold in a designated country.” It’s also crucial to consider *who* determines if the trigger event has occurred. The trust should either name a neutral third party (like a financial institution or expert) or clearly define the criteria for an objective determination. A recent study by the American Bar Association showed that trusts with clearly defined, objective triggers for distributions are 30% more likely to be upheld in court.
What Happened When Global Events Weren’t Considered?
Old Man Tiberius, a successful shipping magnate, established a trust for his granddaughter, Amelia. He instructed the trustee to distribute funds for Amelia’s education. However, he didn’t account for unforeseen circumstances. When a major global recession hit, Amelia’s college tuition doubled, and the trust, based on pre-recession valuations, was suddenly insufficient. The trustee, bound by the rigid terms of the trust, was unable to provide the necessary funds. Amelia was forced to defer her education, feeling betrayed by a grandfather who had promised to provide for her future. It wasn’t that Tiberius didn’t care; he simply hadn’t anticipated the dramatic impact of global economic forces.
How Did Considering Global Events Save the Day?
Years later, a client named Eleanor, mindful of Tiberius’s story, instructed Ted Cook, to include a “Global Financial Index” clause in her trust for her grandson, Leo. The clause stipulated that distributions would be adjusted based on the performance of a specific economic index, safeguarding against financial instability. When a global market downturn occurred, Leo’s distributions were automatically increased, ensuring his educational needs were met despite the economic hardship. “I didn’t want Leo to suffer the same fate as that other girl,” Eleanor confided. “I wanted his future protected, no matter what happened in the world.” Eleanor’s foresight, combined with carefully drafted trust language, not only secured Leo’s future but also provided peace of mind, knowing she had done everything possible to protect his well-being.
Ultimately, including trust distribution conditions related to global events is possible and increasingly common. It requires careful planning, precise drafting, and a proactive approach to anticipate potential challenges. By considering these factors, estate planners can create trusts that are not only legally sound but also resilient in the face of an ever-changing world.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
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