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When beneficiaries want to benefit others

Trust-fund beneficiaries have a bad reputation in some ways. Adults are sometimes ridiculed as trust-fund babies and college students from wealthy families are labeled trustafarians. Certainly, there are those who inherit wealth and don't seem to do anything with it except provide themselves with luxury. But there are some who inherit money through wills or trusts and give much of it away to deserving charities or even needy friends.

There are groups that offer guidance to young people who have inherited or stand to inherit wealth, and encourage them to donate some of that money to charity. Some members of these groups loan money to friends without interest or give it away outright.

Many, if not most, individuals who leave wealth to future generations encourage philanthropy, experts say. However, they may not want their children or grandchildren to simply give all their inheritances away in lump sums. Those who set up trusts may encourage the beneficiaries to give away part or even all of their income from the trust, but instruct them to leave the principal alone. Trusts may also be set up to dole out money only in relatively small chunks to make sure that no beneficiary takes out too much at once. Some trusts are written so that trustees have discretion to refuse beneficiaries' requests.

Too much discretion can be a dangerous thing, however. Trust disputes often pit beneficiaries against trustees who they feel have breached their fiduciary duty by doling out too much or too little, self-dealing or damaging the principal through imprudent investments.

These disputes can sometimes look to outsiders like a bunch of wealthy heirs and heiresses fighting over money they didn't earn. But it isn't always like that. In many cases, the people who set up these wills and trusts in the past wanted their beneficiaries to have the freedom to use their wealth as they saw fit. In many cases, that can mean using it for the greater good.

Source: The Boston Globe, "For some who inherit, deciding how to share is top job," Paul Sullivan, March 27, 2013

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