Take a moment and think back to when you were 18. You were a brand new young adult eager to explore the world. Maybe you had aspirations of college or jumping into the workforce, who knows, maybe you were exhausted from high school and needed to take a ”gap” year in the name of self-care. It is fair to say that everyone probably had a different idea of what their future held, but we can mostly all agree that we had one thing in common… we were all broke. However, being broke was not necessarily a bad thing, you learned to live within your means, you knew how to make the best Ramen noodles and you knew which restaurants had specials on what days.
Now imagine if you were to receive an inheritance from a parent or grandparent that has passed. It would not have to be a lot, something is a lot more than the nothing you had. Do you think you had the financial prowess and restraint to use these funds in a prudent manner to secure your financial well-being for the years to come? I think that it is safe to assume that the majority of us would probably say no. I for one know that I would have been at the dealership the next day looking for a new truck and most likely would have already bought a new set of golf clubs. Needless to say, it is not uncommon for young adults to have poor money management skills.
Now apply the same scenario above to your family. Would your child or grandchild be able to prudently manage a monetary gift that they may have received from your estate? A gift that comprises of all of the assets you worked for to acquire over your lifetime. While there may be exceptions to the general rule, most young adults would not be prepared to efficiently undertake such responsibility. How then do you ensure that the gift you leave them is cared for in a way that allows them to use the gift as you intended? The answer is a Trust.
A trust can hold the assets of your estate and distribute them according to your wishes. For example, you may elect to have the trustee of the trust make a distribution to a beneficiary on an annual basis. They could use this distribution for use for school, housing or other reasonable necessities. Utilizing a Trust ensures that the gift is spread out over time for the benefit of the child or individual. This delay in distributions has many advantages, some instances may include: 1) helping a child with bad spending habits; 2) allowing the majority of the inheritance to be invested and grow; 3) protecting a child’s inheritance from a failed marriage; 4) protecting a child’s inheritance from creditors; or 5) disabling a child that may have a substance abuse or gambling problem.
To give an example, I will use my own personal Trust that was established for my family. My wife and I just had our first child, if she is anything like her mom I know that she will need help managing any monies she may receive so it is not all spent shopping. In our Trust we set forth specific conditions and reasons for which she could receive distributions. We included language that would allow a trustee to give her distributions for issues relating to her health, education, maintenance and support. We made sure that if anything were to happen to her mother and I that she would be taken care of in our absence.
There seems to be a negative connotation following the idea of controlling something beyond the grave. However, it is our responsibility as parents and grandparents to help our children and grandchildren as they grow. Part of this help includes being proactive in our planning for our children or grandchildren to ensure they have the best opportunity for a successful life.
Casey P. Cook, Esq.
”Even if you are on the right track, you’ll get run over if you just sit there.” Will Rogers