Your estate plan should cover what happens to your assets when you die. Yet, you might have concerns about leaving assets to a particular person.
You might be unsure if they are ready to handle it, and having worked hard to build this wealth, you don’t want them to waste it. A trust can help you avoid this dilemma.
You can delay the distribution of funds
Let’s say your children are still young. If you were to die in the next few years, they might not be able to inherit because no one can inherit before the age of 18. Once they turn 18, they still might not have the maturity to handle their inheritance. Thus, you may opt to create a trust to hold the money for them until they reach a certain age, say 21 or 25.
You can drip-feed them funds
You could also choose to pass someone a monthly or annual amount while preventing them from accessing the whole amount in one go. Then, if they mishandle the money, they will only be able to waste a certain amount, with the rest remaining safe inside the trust until the next scheduled distribution.
You can condition the distribution of funds
Imagine if your son is struggling with drug addiction. You still love him and want him to inherit your wealth. However, you are scared that receiving it could give him greater access to drugs, and he might die as a result. Instead, you could use a trust to incentivize him to overcome his problem, making attending a recovery program and staying clean for a certain amount of time a prerequisite for inheriting the trust’s contents.
Deciding whether to create a trust and what rules to set can be challenging. That’s why it is advisable to take legal guidance.