Trust distributions can be set up in a variety of ways, and you get to decide in advance how you want to do this. If you’re using a trust as part of your estate plan, you get control over what happens to the assets in the fund. Even though you have already passed away, the trustee that you select ensures that your instructions are followed.
One way to use a trust is to make age-based distributions. Below are two reasons why you may want to do so.
Delaying the payout
To start with, you may be concerned about a beneficiary’s age. Maybe you are leaving assets to a 19-year-old college student. You know that the money you’re leaving them could be life-changing, allowing them to get a free education, buy a house or start a business without going into debt. But you’re worried that they’re just going to make poor financial decisions at 19 years old.
To address this, you can specify multiple ages when the beneficiary gets their money. You may give them 10% at 19 so that they can enjoy it. But they don’t get the next 40% until they turn 25, and they don’t get access to the remaining 50% until they turn 35. This lowers the odds that they will impulsively waste all the money you’ve left them by spreading out the distributions and giving them the money when they are older and more responsible.
Minors cannot inherit
Another thing to remember is simply that minors often can’t inherit property. So if you’re making an estate plan and some of the beneficiaries are under 18 – such as your grandchildren – then you may need to put those assets in a trust.
No matter how you want to use a trust in your estate plan, it’s crucial to understand all of your legal options.