A trust can be an important part of your estate plan. You can put funds into a trust and then leave instructions for the trustee regarding how they can use those funds for your specified beneficiary.
There are many different ways that you can do this, and every situation is unique. It is important to consider exactly what will work best for you, your family and the beneficiary. Below are just three examples to keep in mind.
1. Delaying the inheritance
For one thing, with young beneficiaries, you may want to delay the inheritance. You can state that they can only access the funds in the trust once they reach a certain age. If a beneficiary is only 18, for instance, you could delay their access until age 25 or 30.
2. Protecting certain benefits
If a beneficiary receives government benefits, then it can be helpful to use a special needs trust. Because the trust owns the funds, the beneficiary can still pass a means test and keep their benefits. Giving them the inheritance directly could disqualify them.
3. Rewarding specific behaviors
A trust can also be used to reward a beneficiary for reaching certain goals or behaving in a certain way. For instance, you could set up a trust that they can access if they graduate from college. You could also authorize distributions from the trust based on professional success, such as saying that they can make annual withdrawals, but they can only take out as much as they earned that year. This gives them an incentive to reach these goals.
Again, these are only three examples, and you can use a trust in many different ways. It can help to work with an experienced attorney as you determine what will be right in your situation.
