I often sit with clients in our Manhattan office who have built something substantial over a lifetime of work. They aren’t worried about taxes or probate—we can plan for those. Their real concern is more personal. They look at their children, often in their late teens or early twenties, and ask me, “Russel, how do I give them everything without ruining them?” They’ve heard the stories, seen the stereotypes. They want to provide a foundation, not a free ride.
The term “trust fund kid” conjures images of reckless spending and a life without purpose. In my experience, that outcome is a failure of planning, not a function of wealth. A trust is one of the most powerful instruments we have for transferring not just assets, but values. It’s a way to be a parent long after you’re gone. The difference between creating a steward and a stereotype comes down to one thing: intentionality.
A Trust Is a Relationship, Not an Account
A trust is not simply a bank account that magically opens on a child’s 21st birthday. It is a legal relationship—a fiduciary arrangement with three key roles:
- The Grantor: The person who creates and funds the trust (you).
- The Trustee: The person or institution legally responsible for managing the trust assets according to your instructions.
- The Beneficiary: The person who will receive the benefit of the trust assets (your child).
The trustee is the central figure. Their role is governed by a strict fiduciary duty—the highest standard of care in our legal system. They are legally bound to act in the best interest of the beneficiary and follow the rules you lay out in the trust document. This isn’t just about writing checks. A trustee’s work is guided by New York’s Prudent Investor Act, codified in EPTL § 11-2.3, which requires them to manage and invest the trust’s assets with skill and caution.
Choosing a trustee is one of the most critical decisions a grantor will make. Do you choose a family member who understands your values, or a corporate trustee with institutional experience? Often, the answer is a combination of both. The key is that this person acts as your proxy, exercising the judgment you would if you were still there.
Building Guardrails for Growth
The power of a trust lies in its structure. It allows you, the grantor, to establish rules and incentives that encourage responsible behavior. A poorly drafted trust might simply direct the trustee to distribute the entire principal to the beneficiary at age 25. A thoughtfully drafted one does much more.
We work with families to design trusts with specific, purpose-driven provisions. These aren’t about control for its own sake; they are about providing guidance. For instance, we can structure a trust to:
- Distribute assets in stages. A beneficiary might receive one-third of the principal at age 30, another third at 35, and the remainder at 40. This gives them time to mature financially between distributions.
- Incentivize work and education. An “incentive trust” can be written to match the beneficiary’s earned income, encouraging a productive career. We can also set aside funds specifically for educational pursuits or the purchase of a first home.
- Protect assets from creditors or divorce. A properly structured trust, often with a spendthrift provision, can shield the inheritance from a beneficiary’s future creditors or a divorcing spouse. This ensures the legacy you built stays within the family.
These provisions are the “guardrails.” They provide structure when a young person is still developing financial discipline. The goal is not to create a cage, but a framework that supports their growth into a capable adult.
From Beneficiary to Steward
The ultimate goal of generational wealth planning is to create a good custodian for the future. Stewardship. It means seeing the family’s assets not as a personal windfall, but as a resource to be managed, grown, and eventually passed on. This requires a shift in mindset that a trust can help facilitate.
I advise clients to be transparent with their children about the existence of the trust and its purpose. Hiding it only creates a shock when the inheritance is revealed. A better approach is a family meeting where you explain the “why” behind your planning. Frame the trust as a tool to help them achieve their goals—to get an education, to start a business, to support their own family—not as a replacement for their own ambition.
When a beneficiary understands the work and sacrifice that went into building the wealth, and the purpose for which it is intended, they are far more likely to become a prudent steward. The trust becomes less of a handout and more of a responsibility they are prepared to carry.
The “trust fund kid” is a caricature born from stories of poor planning. With deliberate thought and careful legal drafting, you can design a trust that fosters purpose, encourages responsibility, and extends your legacy of care for generations. It’s one of the most profound acts of parenting you can undertake.
If you are beginning to think about how your own legacy will support your children, a good first step is to clarify your intentions. We start every new plan by asking clients to complete a ‘Legacy and Values’ worksheet to help articulate the principles they want their trust to uphold for their family.
