Sprinkling or Spray Trusts
What is a Sprinkling or Spray Trust?
A sprinkling or spray trust is a unique type of trust in which the trustee is given broad discretion to distribute trust assets to the beneficiaries as their need arises. The trustee can release “a little here and a little there” of the funds, in effect “sprinkling” or “spraying” the trust funds to the beneficiaries over time. This is different from other forms of trusts, in which the funds are distributed according to very specific conditions (such as on a certain date, or after completion of various requirements).
What Duties Does the Trustee Have in a Sprinkling or Spray Trust?
The trustee is the person designated to oversee and manage the trust funds until they are distributed to the named beneficiaries. As in any trust, the trustee for a sprinkling trust or spray trust must exercise various fiduciary duties, such as the duty to maintain sound business judgment when investing or distributing the trust funds. Also, they have a duty not to mingle their own assets with the trust assets.
However, in a sprinkling or spray trust, the trustee often has very broad discretion and freedom when making decisions regarding distributions. Here, the creator of the trust will usually lay down guidelines for when the trust assets can be distributed. But in many cases, it’s up to the trustee to decide when a beneficiary should receive a distribution. This may require great skills of judgment and decision-making on the part of the trustee.
Most discerning trustees will decide to wait to distribute trust funds to very young minors. They may even wait until the minor turns the age of majority (i.e., 18 years old). They may also withhold funds from a beneficiary who is perceived to be acting under conditions of fraud or misrepresentation.
What if I Have a Dispute Over a Sprinkling or Spray Trust?
Due to the amount of freedom granted to the trustee, many trust disputes can arise in relation to a sprinkling or spray trust. Some of these include:
- The trustee has overstepped their scope of authority (for instance, making distributions to persons not named as beneficiaries)
- The trustee has failed to authorize a distribution when the beneficiary is entitled to such under law
Beneficiaries can also have disputes amongst themselves. For instance, one beneficiary may be complaining that certain distributions are unfair or unfavorable. Or, a beneficiary may be proposing that the trustee be replaced.
These types of disputes are best handled in a court of law through the intervention of a trusts lawyer. The court will usually revert to the original trust document to determine the rights of the beneficiaries as well as the scope of authority of the trustee. In some cases, a re-writing of the trust document may help to clarify any previous mistakes or misunderstandings. In other cases, a damages award may be awarded to reimburse beneficiaries for their losses.
Do I Need a Lawyer for Help With a Sprinkling or Spray Trust?
Sprinkling trusts or spray trusts are very specific types of trusts. They generally require the assistance of oversight of a lawyer for implementation. You may wish to hire a lawyer if you need assistance in forming or reviewing a sprinkling or spray trust. Your attorney can advise you on matters such as trustee duties and beneficiary rights. Also, your lawyer can provide you with representation in case you need to file a lawsuit over any trust dispute matters.
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Last Modified: 06-12-2013 11:42 AM PDT
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