You’ve worked hard for what you’ve earned over the years. Now you’re making an estate plan. You may have multiple beneficiaries, but you do anticipate leaving the bulk of your financial assets to your children. A major part of the reason that you worked so hard throughout your life was to provide for them moving forward, and inheritance is how you plan (at least, partially) to achieve that goal.
But when looking at your children’s own spending habits, you may be concerned that they’re going to waste the money that you leave to them. Is there any way that you can control how they use it, even after you pass away?
Putting inheritance in a trust
One of the best ways to control how others use an inheritance is to put assets in a trust, rather than giving them to your beneficiaries directly.
For example, perhaps you want to ensure that your children get a good college education. You don’t want them to spend their money traveling or making frivolous purchases. You could put the inheritance in a trust with instructions stating that it must be used for college tuition. When your children graduate from college, only then can they have the remaining balance of the trust to use as they wish. This arrangement can be set up while you’re living. Not all trusts are testamentary in nature.
If you don’t have a specific way that you would like your children to use their inheritance, you can put it in a discretionary trust. If you do this, then the trustee that you name gets to use their own discretion to decide how the money should be distributed. It’s important to choose someone who has the same values and goals in mind that you do. This can prevent your children from taking money out of their trust to use for anything that they want. Your trustee could approve purchases like a family home or buying a business, while denying purchases that are considered nonessential or frivolous.
Setting a trust up
Depending on your goals and circumstances, it may be highly beneficial to use a trust when doing your estate planning. The exact specifics of your situation are unique, so seeking legal guidance tailored to your situation is wise.
