It is natural to look at estate planning as something that is all about making decisions with regard to how the pie will be sliced and who will get what. In reality, this is only part of the equation. You should also consider the life situation of each person on your inheritance list.
There are many ways to arrange for postmortem asset transfers. You do not have to choose the same way to leave inheritances to everyone in the family, and in many cases, this is not wise.
Let’s look at some of the different reasons why you may want to choose specific estate planning devices to adapt to the circumstances.
Let’s say that you are going to be leaving an inheritance to a granddaughter that will probably be close to college age at the time that you pass away. You are in a position to leave her a life-changing amount of money, but you do not want to take away her motivation to achieve her full potential.
Under these circumstances, you could make her the beneficiary of an incentive trust. To execute this strategy, you would fund the trust and name a trustee to act as the administrator. It can be someone that you know personally, but another option would be to use a professional fiduciary.
Trust departments of banks and trust companies provide this service. One of the benefits of using a professional fiduciary is that there will be no emotional connection between the trustee and the beneficiary.
Secondly, an experienced financial manager can be trusted to position appreciable assets in the ideal manner.
You could instruct the trustee to provide living expenses and pay college tuition as long as the beneficiary remains a student in good standing. If you want to, you could provide bonuses for making the dean’s list and lump sum distributions as graduation rewards.
To instill a work ethic, you could leave instructions for the trustee to match every dollar that the beneficiary earns on the job.
Since the work incentive is quite powerful, the loved one in question would have every reason to go to graduate school to be able to maximize the salary match. The match would also give the beneficiary the ability to pursue a certain path that doesn’t necessarily pay a great deal of money.
People With Disabilities
Individuals with disabilities usually rely on Medicaid and Supplemental Security Income. These are need-based programs, so an improvement in financial status can cause a loss of eligibility.
You could safely provide for someone in this situation if you establish a supplemental needs trust. The trustee could use the assets to make the beneficiary more comfortable, but benefit eligibility would remain intact.
Protect a Spendthrift
If you use a simple will to direct inheritances to every beneficiary, they would receive lump sum bequests. Someone who is not good with money would have no spending safeguards, and the assets would not be protected from creditors.
To protect a poor money manager, you could create a living trust with a spendthrift provision for your beneficiary. You would act as the trustee while you are living, so you would maintain control of the assets until you pass away.
After your death, the trust would become irrevocable, and the successor trustee that you name would manage the assets. The beneficiary would not be able to access the principal, and this would also apply to their creditors.
You could leave instructions for the trustee with regard to the way you want the assets to be distributed. For example, you can provide distributions of the trust’s earnings broken up into monthly increments.
Schedule a Consultation Right Now!
These are just a handful of the circumstances that can exist, but there are many others. If you would like to discuss your unique situation with a licensed attorney, we are here to help.
We will gain an understanding of your objectives and the concerns that you have about each individual heir. You will be apprised of your options, and we will make recommendations.
Ultimately, you will go forward with a custom-crafted plan that is ideal for you and your family.
If you are ready to get started, you can schedule a consultation at our Charlotte, North Carolina or Huntersville, North Carolina estate planning office if you call us at 704-944-3245.
The number for the location in Ashland, Kentucky is 606-324-5516, and the number for our Florence, Kentucky location is 859-372-6655. You can also fill out our contact form if you would rather send us a message.