Trusts can be a major part of any estate plan, and there are a lot of different ways that you can use them. It just depends what benefits you’re looking for and what you’re trying to accomplish.
To help you begin this process, let’s take a look at three examples of how you may want to use a trust. Again, these are not all of the options, but they can help show you what the benefits may look like. You can then apply this to your own estate plan.
Making age-based distributions
First off, many people are writing a will that includes minors. If your heir is a minor, then you may not want to leave them their inheritance immediately. You can use the trust to put the money aside and only give it to them when they reach a certain age. Some people do this simply to stipulate that they need to be 18 years old. Others will pick multiple ages, such as paying out part of the trust at 25 years old and the remaining amount at 35 years old.
Protecting an heir from themselves
Another option, if you have an heir that you don’t believe will use the money wisely or who may waste the inheritance they’re given, is to use a discretionary trust. The money in the trust can still be used for the heir, but it doesn’t belong to them. Instead, it belongs to the trust, and the trustee gets to decide how they can use it. The trustee is not supposed to get any of this money themselves, but they can help your heir and make wise choices and avoid wasting the inheritance.
Setting it aside for certain purposes
Finally, you can always identify certain goals that you want to accomplish and put the money toward that specifically. For instance, maybe you have young grandchildren, and you would like them to be able to go to college, but you know that the cost in the future could be highly prohibitive. You could establish an educational trust that pays for their tuition and other costs to ensure they get an education.
No matter what you’d like to do with your trust, just make sure you know what steps to take to set it up properly.