You’ve spent years accumulating your wealth through hard work and discipline. Now you’re ready to share this great accomplishment with loved ones. Only one potential problem stands in your way – frivolous spending.
So what can you do to protect your beneficiaries from themselves?
Lucky for you, a recent article posted by Benjamin F. Edwards & Co. briefly explains how a trust can be set up to accomplish your individual needs.
Although many assume a trust is only used by the super wealthy for estate tax planning – it can also be used for anyone who wants to retain a degree of control on how and when beneficiaries receive their inheritance. There are a range of instructions you can give the trustee and you need to make sure you are using the right terminology to prevent confusion and ensure the provisions are enforceable under law. For example, you need to decide whether you want give the trustee broad discretionary powers to provide more flexibility or whether it is more appropriate to give limited or narrow powers so the trustee can only distribute for certain expenses at certain times to certain people.
Of course a major consideration when choosing the range of powers to give to the trustee is who you pick as the initial trustee and whether you have alternative (successor) trustees that you trust as much as the initial trustee. It’s also important to discuss your thoughts with these potential trustees to make sure they are on board with the plan and understand your intentions. There should be no surprises here.
Another important consideration is how much you intend to put in the trust and how long you expect the trust to last. Generally, you may find it more practical to give a trustee more broad powers if you expect the trust to last for decades because it needs the flexibility to adapt to changed circumstances. Whereas a trust with relatively little may simply direct a trustee to only spend the money on the education of the family or a similarly narrow category of expenses.
As you can see, trusts can be used by anyone, but tend to be complex vehicles of transferring wealth. If you have any questions or would like to discuss whether a trust might be right for you then call Simmons & Schiavo at (781) 397-1700 or visit our contact us webpage today.
Reference: Benjamin F. Edwards & Co. (June 6, 2016) “Strategies to Keep Your Beneficiaries from Blowing Their Inheritance”