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Estate planning

Estate Planning: Vacation trusts, who knew?

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Q: We took a family vacation every summer with all of the kids and grandkids. When we die, can we set up a trust to pay for an annual family vacation so that the tradition can continue? Would we do that in our wills or do we need to draft a trust?

A: I love this. I’ve drafted a lot of creative trusts but I think this is the first time anyone has asked about a vacation trust.

The simple answer is, yes: I think that a trust can be drafted to provide an annual family vacation.

Trusts are incredibly flexible. If you have a plan, I’m guessing a creative attorney can make it happen.

I suggest that you discuss it with the kids and give them a say in the vacation planning. If you have a cabin that all of you go to each summer, it will likely be pretty easy. If you take a different vacation each year, you will probably want to give the trustee a lot of discretion or allow the trustee to rely upon the advice of the family members most likely to be involved in the planning.

Obviously, something like a vacation trust is going to require some funding, so have a plan on how to pay for it. It could be funded by the sale of the family home or perhaps with insurance proceeds. Wherever the money comes from, make sure that the funding is designated correctly in the document. Like I said, have a plan.

The trust can be created in a couple of ways. The trust could be created in a will or a revocable living trust. I suppose that you could also create a separate free-standing agreement but I’m not sure that would be necessary. By using a will or a living trust, you can easily tie the vacation trust into your estate plan.

One concern that I would have is taxation. To be perfectly honest, I’m not sure how a vacation trust would be taxed. Would the trust pay all of the tax on the income? Would trust income be distributed equally to all of the folks who go on the vacation? Accountants, help me out here.

I love this idea and I hope that you pursue it. Continuing the tradition of a family vacation sounds like a wonderful legacy.

Christopher W. Yugo is an attorney in Crown Point. Chris’ Estate Planning Article appears online every Sunday at Address questions to Chris in care of The Times, 601 W. 45th Ave., Munster, IN 46321 or to Chris’ information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant, or estate-planning specialist.


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