You are making an estate plan and choosing beneficiaries to whom you want to leave an inheritance. For many of the beneficiaries, this is a simple process. You are just leaving them financial assets in your will, and they will receive the money after you pass away. The estate executor can make the distributions.
But say that you have a beneficiary who raises some concerns. Maybe they spend money frivolously or in ways that you do not necessarily approve of. Maybe they are easily defrauded, so you are worried that they are just going to lose the money that you leave them. Is there any way that you can control their spending?
Setting up a trust
Rather than leaving them the money in your will, it may be better to put their inheritance into a trust. You can then name them as the beneficiary of that trust.
At the same time, you also name a trustee, who is another individual involved in the process of withdrawing the money and transferring the funds to the beneficiary. You can then set terms for the trust, and the trustee will follow them.
For instance, you could tell the trustee to use their discretion and authorize reasonable purchases. But you could also give them specific guidelines, such as authorizing withdrawals for the beneficiary’s college education, medical needs, housing costs and other expenses of this nature.
In this sense, you are essentially deciding how the beneficiary will use the money, so you know that it will not simply be wasted once they receive their inheritance.
Setting up a trust
Creating a trust can be an important part of making your estate plan. It can help to work with an experienced law firm as you look into all of your options.