Q I heard you speak recently and you mentioned that someone could set up a trust to hold a family vacation home for the entire family to enjoy. We have this situation in our family. Our grandparents have a cabin in Yosemite which we have enjoyed our entire lives. They have both passed and the cabin is now in my mom’s name. What’s the best way to set it up so my siblings and I, along with our kids, can continue to enjoy the cabin?

A A simple and reliable way to accomplish what you have outlined is to use a “purpose trust.” Unlike the usual revocable living trusts that many of us have as part of our estate plan, a purpose trust is created for “something” rather than “someone.” Our living trusts usually provide for our children or grandchildren whereas a purpose trust, as the name implies, is for a specific purpose.

A pet trust is a type of purpose trust. Yes, it provides benefits for Fluffy, but it is set up for Fluffy’s care and, normally, once Fluffy has retreated to that great scratching post in the sky, whatever funds remain in the pet trust are normally distributed to charity.

Purpose trusts can also be set up for gravesite care, the care and maintenance of an antique car collection, art, gun collections and jewelry. The purpose trust for a gun collection, for example, can allow family members to use the weapons and the use and enjoyment is outlined in the trust. A trust protector or enforcer makes sure terms of the trust are adhered to and funds held by the purpose trust are used to maintain the collection.

In your family, a purpose trust could be set up to hold and maintain the cabin and the trust protector would work with your family members to schedule occupancy and otherwise administer the trust. One thing to be aware of, however, is that in California we have the “rule against perpetuities.” Entire semesters of law school are devoted to this law so without going into too much depth, it means that the purpose trust cannot go on forever. This said, it can go for a very long time and the details should be discussed with your estate planning attorney.

One of the best aspects of a purpose trust, at least from the trust protector’s standpoint, is that unlike our usual living trusts, actions that can be taken against the protector are extremely limited.

In a typical living trust, a trustee or trust protector can be challenged or sued by beneficiaries very easily and, unfortunately, it frequently happens. Because the purpose trust’s sole reason to exist is to administer the cabin, you and your family are not technically beneficiaries in the purpose trust. Yes, you may benefit from the use of the cabin but, because of this distinction, it would be challenging to bring a suit against the protector as long as the protector is carrying out the terms of the purpose trust.

Finally, unlike usual trusts, unless the purpose trust is receiving income, it is generally exempt from annual income tax reporting.

Q Can I state in my trust that my beneficiary must have a prenuptial or postnuptial agreement in place before they receive money from me?

ATrusts can be created “for any purpose that is not illegal or against public policy,” so, yes, you can state that a marital agreement must be in place before a beneficiary receives funds. You could not state that the beneficiary must divorce his or her spouse before receiving funds as this would be against public policy.

Liza Horvath has over 30 years of experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust Management Company. This is not intended to be legal or tax advice. If you have a question call (831) 646-5262 or email liza@montereytrust.com