Many trusts are designed so that a beneficiary receives trust income during his or her lifetime with the remainder of the trust going to someone else after the heir passes away. These trusts often cause disputes between the beneficiary and the remainderman, illustrated in a high profile New York case.
Irving Bender became the beneficiary of a trust created by a New York real estate mogul. Under the terms of the trust, Bender was supposed to use trust assets during his lifetime but retain his normal and usual standard of living. The remainder of the trust was to go to United Jewish Appeal.
In a lawsuit, United Jewish Appeal alleges that Bender wasted $3.5 million of trust assets on fancy hotels and other luxuries that were well beyond his normal standard of living. It is also alleges that these expenditures were allowed by the third-party trustee so that it could get business in the future from one of Bender's relatives.
The New York Post has more on this story in an article titled "Real-estate heir blows $3.5M meant for charity on cars, hotels: suit."
Of course, Bender disputes the allegations and it is too early to tell which of the parties is correct.
These types of suits are not unusual, however.
Trusts often have conflicts between present and future beneficiaries. The keys to creating a trust that does not have those types of conflicts is to set specific limits in the trust and to choose a trustee that does not have a business interest in taking one side of the conflict over the other.
An experienced estate planning attorney can help parties steer clear of these conflicts.
Reference: New York Post (April 7, 2015) "Real-estate heir blows $3.5M meant for charity on cars, hotels: suit."