Far too many people think that estate planning equals the creation of a simple will. They assume trusts are only useful for extremely wealthy people with complicated holdings. The idea is that you have to settle for a will and try to make it work as best you can.
In reality, this is a very shortsighted perspective. When you work with our firm, you’ll find that there are targeted estate planning solutions to accomplish specific objectives. Let’s look at a handful of scenarios that require reactions to particular circumstances.
Spendthrift Protection Planning
Let’s say you have an adult child who is not good with money. You are concerned about leaving them a significant lump sum inheritance. This is the way it works if you name them in a will. They go forward with the funds, and they are on their own.
You don’t have to settle for this approach and cross your fingers. Plus, you don’t have to lock up your funds in some inaccessible vault while you are still alive and well.
Revocable Living Trust
To react to this situation, you could establish a revocable living trust. You would be the trustee while you are living, and your child would be the beneficiary. As the trustee, you would have total control of the assets you transferred to the trust.
The “revocable” designation is quite literal. You have the power to dissolve the trust at any time, and you can change the terms as you see fit.
After your passing, the trust would become irrevocable. The successor trustee you designate would manage the funds on behalf of the beneficiary. Assets held by the trust would be protected from the beneficiary’s creditors.
In addition, you can dictate the terms of the distributions. Many people will allow for limited monthly distributions with larger lump sums when the beneficiaries reach certain age thresholds. This is one common approach, but the point is that you control the nature of the dispersals.
Providing Incentives
Another possibility is an incentive trust that can guide a beneficiary toward desired behavior or away from destructive actions. With this type of trust, the beneficiary must satisfy certain conditions before they receive distributions.
You may use this type of trust to lead a young beneficiary toward a college education. The trust could pay all the bills as long as the beneficiary remains a student in good standing.
People sometimes allow this type of trust to match the beneficiary’s earnings after graduation. Once again, these are a couple of possibilities, but the specific terms are up to you as the grantor of the trust.
Children From a Previous Marriage
Here’s another hypothetical scenario: Imagine you are a parent getting remarried relatively late in life. You have significant resources, and based on your respective ages you’re likely to predecease your spouse-to-be.
From an estate planning point of view, you may have concerns about satisfying all your responsibilities. Under this scenario, you could utilize a qualified terminable interest property (QTIP) trust.
Your spouse will be the first beneficiary, and your children will be the successor beneficiaries. Assuming you die first, your spouse would receive distributions of the trust’s earnings for the rest of their life.
In addition, the trust could be set up to allow your spouse to use property owned by the trust. You could choose to give the trustee the latitude to provide additional discretionary distributions.
The surviving spouse could not change the terms of the trust. After their death, your children would inherit the assets that remain in the trust.
Take Action Today!
As you can see, you have options when you plan your estate, and these are just some of them. When you work with us, we will make sure that your plan is carefully tailored to suit your needs.
To get started, call our Petaluma, CA estate planning office at 707-769-9975 or send us a message through our contact page.
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