Setting up a living trust or drafting a will including a trust involves making choices about how to regulate your children’s inheritance. There are several things to consider: your children’s ages, the size of the inheritance and your degree of concern. Generally speaking there are three options:
- An outright distribution, free of trust, to a child who is at least 18 years of age or older;
- A distribution to a trust for the child with defined provisions and a termination of the trust at a specified age; or
- A trust for the life time of a child.
The first option may be chosen, for example, if your children are age 30 or older and are free of health, marital, tax and liability issues. You may decide that an outright distribution to the child/children is best and, in addition, set up trusts for grandchildren if the child/children predeceases. The second scenario may be the optimum choice if, for example, you leave minor children as heirs. The inheritance may be placed into a trust where distributions can be made to their guardian till they reach a specific age. Once this specific age, i.e. 25, is reached, the remaining principal can be disbursed. This trust can be set up to allow a trustee to make distributions for important events that come up such as a college education, a wedding or the purchase of a new car. The third option, a life time trust, may be selected if the inheritance is such a large amount that you wish to have a trustee distribute the funds to the child/children over their life time. This is the most restrictive of the three.
All of your children are unique, and you can choose to arrange different terms for distributing inheritance for each child. These matters are important and you have a variety of options. Discuss them with your estate planning attorney to decide what is best for you and your children.
Source for Post: California Estate Planning Blog
Comments