‘Legacy language’ is the legal expression of the specific manner your Trustee must use designated trust assets. While the added complexity of creating a separate trust for these designated funds may be more than what is needed, several states now have laws permitting ‘purpose trusts’. Legacy language can be used in your revocable trust as well.
Three common goals of legacy planning are perpetual existence; separating the principal of the legacy assets from the revenue those assets generate; and separating the management and control of the legacy assets from those who benefit economically.
Many states–such as Delaware, South Dakota, Nevada, Virginia–now allow “perpetual” trusts. These trusts can last forever or for an extraordinarily long period of time, like 1,000 years.
Separating the principal of the legacy assets from the revenue those assets produce and separating the management and control of the legacy assets from those who benefit economically, can be achieved by creating up a multi-tiered trust structure.
While your purpose trust can own the legacy assets through a corporate entity, the legacy trust can provide that all of the income received to be paid to one or more traditional family dynasty trusts of which your family can be beneficiaries. This lets your family or other beneficiaries benefit economically from your legacy assets, without necessarily involving them in the management and control of those assets. By creating a separate vertical for the management and control of your legacy assets, you also allow yourself to be intentional with the succession of that management and control and to integrate family members or outside advisors who are best qualified to oversee your legacy.
In a traditional dynasty trust structure, the ever-increasing pool of potential beneficiaries is a big issue. Even if you create maximum protections for the trustees and give them complete discretion as to how and when (if at all) to make distributions to beneficiaries, the trustees of the traditional dynasty trust still have fiduciary duties to those beneficiaries. As a result, the beneficiaries can file a lawsuit against the trustees, which can pressure trustees or frustrate the system, which may wreak havoc with your legacy plan.
With a “purpose” trust there are no beneficiaries, so the trustees don’t owe a fiduciary duty and don’t need to worry about lawsuits. With a purpose trust, you appoint someone (also known as a “protector” or “enforcer”) who will ensure that the purpose of the trust is being fulfilled. The trustees are free to focus on carrying out your legacy plan as you wanted.
Reference: Forbes (May 14, 2018) “Why You Should Consider Using A 'Purpose' Trust For Your Legacy Plan”