A grantor (usually called the settlor in trust law) has very broad freedom to place conditions on gifts to beneficiaries, but that freedom is not unlimited. The precise answer varies by state.
Under the Uniform Trust Code approach adopted in many states, a trust's purposes must be lawful, possible to achieve, for the benefit of its beneficiaries, and not contrary to public policy. These are mandatory limitations that the trust document generally cannot override.
This means a settlor can often impose conditions that might seem eccentric. For example, trusts commonly condition distributions upon reaching a certain age, graduating from college, maintaining employment, avoiding drugs, or achieving other specified objectives. The fact that a condition seems arbitrary or unusual does not by itself make it invalid.
However, courts may refuse to enforce provisions that violate law or sufficiently important public policies. Historically, courts have scrutinized conditions that seriously interfere with marriage, encourage divorce, promote illegal conduct, or otherwise conflict with established public policy. The Restatement of Trusts discusses precisely these sorts of limitations.
Therefore, a provision such as:
“No distribution if the beneficiary gets a tattoo”
could conceivably be enforceable if clearly drafted under the applicable state's law. It may seem controlling or eccentric, but eccentricity alone does not necessarily invalidate a condition.
A requirement that beneficiaries belong to a particular political party would raise more complicated questions. It would not automatically be unconstitutional simply because it appears in a private trust—constitutional restrictions ordinarily constrain government action—but enforceability could depend upon state trust law and public-policy considerations. One should not assume that every unusual condition will be upheld.
Conditions affecting marriage provide a useful illustration of the limits. Courts have sometimes invalidated trust provisions that substantially interfere with beneficiaries' marriage choices as contrary to public policy.
The trustee generally cannot simply veto a provision because the trustee thinks it is ridiculous. A trustee's job is to administer the trust according to its valid terms and purposes and to act in good faith. That obligation itself is treated as a mandatory rule under the Uniform Trust Code framework.
So if the trust validly states, “Beneficiary receives $50,000 upon graduating from college,” the trustee ordinarily cannot decide that education is unimportant and distribute the $50,000 anyway.
On the other hand, if the trustee believes a provision is illegal, impossible, contrary to public policy, or otherwise unenforceable, the trustee should not simply substitute personal judgment for the settlor's. The appropriate course may be to seek instructions or modification from a court. Trust statutes preserve judicial authority to modify or terminate trusts in specified circumstances.
One additional wrinkle is the word revocable. While a trust remains revocable and the settlor has capacity, the settlor ordinarily retains substantial control and can generally amend or revoke it according to the governing law and trust instrument. Many of these beneficiary-condition disputes therefore become practically important after the trust becomes irrevocable, frequently upon the settlor's death.
In short, the rule is approximately:
Settlor's wishes → generally control.
Trustee's personal opinion → generally does not.
Law and public policy → can override the settlor's wishes.
So a settlor has considerable freedom to be eccentric, demanding, or even seemingly arbitrary, but not literally unlimited freedom. The enforceability of an unusual condition ultimately depends upon the trust's governing state law and, where challenged, the courts—not upon whether the trustee personally approves of it.
