Trusts are flexible tools that can be tailored to virtually any end. But, when a trust disburses funds to a beneficiary, the control of the trust ends. A recent story from the New York Times, describes how some young people who have received significant inheritances or trusts, gift the money to causes and sometimes directly to other people.
The Times article calls them "trust-fund progressives" and they recognize the tremendous benefit they often have received, beyond simply a seven-figure trust fund. They typically are the children of successful parents or grandparents, who accumulated significant amounts of financial resources. They created trusts for the benefit of their children and grandchildren, but as one trust advisor notes of the grantors of these trusts, that they want "the inheritances left in trusts to have a positive influence, and most encourage philanthropy."
Some of these children split their inheritances with friends, recognizing they can have a positive effect on those around them. While some have suffered some life reverses, including medical issues, even in those circumstances, they still see the distribution of their good fortune as a positive.
As a trust grantor, one way you can protect your children from potentially gifting away too much too soon, would be to set up a trust that limits the distributions and controls their potential access to principal.
You can discuss the type of trust and the type if limits you would like with your trust attorney when you have the trust drawn up. Your attorney can walk you through the advantages and disadvantages of various trusts to reach the right mix for your situation.
Source: The New York Times, "Among Young Inheritors, an Urge to Redistribute," Paul Sullivan, March 25, 2013