When you create a trust, it is important to think about the unexpected -- about the things that may happen that you cannot predict. You do not want to accidentally keep money from your heirs when you would have preferred to pass it on to them. You can't change the trust after you pass away, so you must plan for all possible outcomes in advance.
If you're thinking about putting money in a trust fund for your children, you probably want to control how you give it to them. For instance, maybe the trust will set it aside for educational costs or maybe it will pay out when they hit a certain age.
Trusts are often used to hold financial assets. For instance, you may put cash aside so that an heir can use it to pay for college, or you may set up your life insurance policy to pay out into the trust when you pass away.
All trusts are not created equal. They all give you different financial options, and they come with their own advantages and disadvantages, depending on your situation.
Dying without a will means you have no control over your estate, and it has to go through the court process, passing on to your heirs in accordance with state laws. Even with a will, it can take time and money to show that the will is valid and start to move assets around -- especially if the heirs have any sort of dispute about the validity of the document. Though a will lays out some of your wishes, it does not really give you control.
Parents typically love all their children equally, but this doesn't blind them to their weaknesses. When it's time to sit down with your estate planning attorney and devise your estate plan, you need to be fully transparent about your proposed heirs' abilities to manage any inheritance you may leave them.
There are many positive reasons to use an incentive trust. You can encourage your heirs to be successful, for instance, and you can ensure that they only get the money when they are mature and responsible enough to handle it.
When most people think about the assets in a trust, they consider monetary assets. Trusts can be used to pass money down to heirs while still retaining some control over that money. For instance, the trustee who administers the account could be instructed to pay out a specific annual amount over a course of 10 or 20 years, rather than just leaving the lump sum to the heir all at once.
It is critical to take your time when naming a trustee, picking someone you know will do a good job. Perhaps your first inclination is to pick one of your adult children. Maybe you have another relative that you can count on. Perhaps you want to use a professional. No matter what route you decide to go, take your time, consider the person very carefully and only make your selection when you feel fully confident that he or she can administer your trust properly.
You're thinking of setting up an irrevocable trust for your heirs. You're interested in a multitude of benefits, from the tax advantages -- which you do not get with a revocable trust -- to the control it gives you over how your heirs get and use their money.