Having worked hard to build up some wealth to pass on to your family, it makes sense that you don’t want to see it wasted. Yet some beneficiaries may not be able to manage an inheritance sensibly.
This could be due to their youth, or due to addictions to gambling, drugs or alcohol. It could also be due to a susceptibility to persuasion to part with money by a controlling spouse or because of a cognitive disability.
A trust can provide peace of mind
Placing the money in a trust allows you to significantly reduce the chance that the beneficiary mismanages the assets you leave them. A trustee or set of trustees named by you can provide a level of control over the distribution of the assets, according to rules you set.
If the only issue is age, you can set up the trust to release funds at a certain age, or over a series of milestones, such as their 21st, 25th and 30th birthdays. If a propensity to burn through funds is the concern, you can have the trustees only release a certain allowance per month or year.
You can, if you like, give the trustees more freedom to decide when money should be released. This can allow your beneficiary to access those funds for a good but unforeseeable reason, such as a great business opportunity or a medical emergency.
Others set up the trusts to make certain payments, such as college fees or even to match earnings or pay out differing amounts depending on the grades a person achieves, to encourage them to focus on their studies and career.
Learning more about your estate planning options can help you create a plan that will work well for you and all your beneficiaries.