As you make an estate plan, you can decide which heirs are going to inherit, you can leave people out of your will if you want – disinheriting them – and you do not have to divide things equally. You can choose who gets your money and other assets after you pass away.
However, some people believe that control of naming one’s beneficiaries isn’t enough. They may be worried about the ways in which their heirs are going to spend that inheritance. They know how hard they have worked to save up this money that they are passing on to their family members. If you’re in this situation and you’re concerned that an heir is just going to waste money or that they might not use it in a way that you would’ve approved of, is there any way for you to control how they spend it after they receive it?
Putting assets into a trust
If you’re leaving money to your heirs, one of the best ways to control their spending is simply to put it money into a trust. Remember that you don’t have to leave it to them in your will, which would transfer it directly into their name. Instead, you can put money in a trust, name them as a beneficiary, and then name a trustee to oversee the distribution process.
An example of this is a discretionary trust. In a case like this, your trustee is the one who gets to make all of the decisions. You can pick someone who you know will only allow the types of spending you would have approved of. The beneficiary can then request distributions from the trust, but your trustee certainly does not have to grant them if the request would fund a purchase or endeavor of which you wouldn’t have approved.
You can also be more specific with trusts if you’d like. For instance, many people set up educational trusts designed to help cover the rising costs of college tuition. A trustee would still be involved, but they would have instructions about exactly what they should use the money for, rather than being allowed to use their own discretion.
Either way, you can see how beneficial a trust may be. Be sure you know exactly what legal steps to take to set one up if this estate planning opportunity appeals to you. Seeking legal guidance is a good place to start.