Depending on the goals of the individual, trusts might name family, friends, or charities as beneficiaries. However, certain types of trusts may be structured with no human or organizational beneficiaries at all.
Why would someone structure a trust for no particular person’s benefit? Non-charitable purpose (NCP) trusts can be set up so that loved ones indirectly benefit from the trust assets.
For example, if an individual plans to leave a family home to the next generation, but they are concerned that children or grandchildren will not be able to afford the upkeep, an NCP trust can be set up to cover property maintenance expenses. These trusts might also be used to cover maintenance costs for collectibles like classic cars, art, or wine collections.
As digital estate planning becomes more popular, individuals might find that digital file storage could come with long-term maintenance fees. An NCP trust can be established to cover these fees.
NCP trusts generally are used for pet trusts as well; however, some states impose limitations on trusts with non-charitable purposes. According to the American Bar Association, “the few states that have adopted the Uniform Trust Code also allow purpose trusts beyond trusts for animals…The provision limits the term of such a purpose trust to 21 years… [and at that time] declares the trust unenforceable.” Some pets live longer than 21 years, which poses a challenge for the long-term care of a pet. The Uniform Probate Code was amended in 1993 to allow states that adopt the code to set forth different limits. North Carolina adopted both the Uniform Trust Code and the Uniform Probate Code provision, which means that North Carolina pet trusts may be enforceable until the last surviving pet named in trust passes away, regardless of how long the animal lives.
During your next estate plan review, ask about trust options that may help provide for loved ones without naming them directly as beneficiaries. A trust protector might be used for effective planning with an NCP trust. Trust protectors can ensure the trust funds are being distributed according to trust terms, can modify the trust should legislation change unfavorably, and can ensure the trust’s purpose is satisfied.