Controlling distributions
Living trusts and testamentary trusts are commonly used to control how and when beneficiaries receive distributions. Think back to when you were age 18. What would you do with five or six figures in cash? Would your decisions be any better at age 21? Would you begin your career with the same intensity if you received a large sum of cash at age 25 without any strings attached? Trusts can set an age at which beneficiaries receive part of all of their inheritance without restrictions. Prior to the age(s) listed, the beneficiary would need to request money via the successor trustee of your trust.Who controls the money?
The successor trustee (who may be a family member, friend or corporate entity) could approve reasonable requests that fall under health, education, maintenance or support. Health, education, maintenance and support is intentionally broad, loose language because nobody can predict the future and it's best not to restrict to much the abilities for your successor trustees to take action when needed. Let your successor trustees know verbally or in writing in your own words what you consider health, education, maintenance and support. Does money for an annual trip to an amusement park count as mental health? Money for education is often self-explanatory. Money for a car to get to and from a new job could qualify and the successor trustee could approve money for a down payment on a house if the beneficiary demonstrates responsibility and makes a strong case. The average inheritance is spent within two years according to various statistics. Distributions can be broken up.-
Examples:
A beneficiary receives 1/3 of her inheritance at age 30. If she spends it all quickly, hopefully she'll be more responsible when she receives another 1/3 at age 35 and the remainder at 40. There are three young beneficiaries of an estate held in a trust. The successor trustee can open three new bank accounts in the trust's name for each child. Money from life insurance and liquidation of other assets can be split equally among the accounts. As a beneficiary has requests, money can come from that specific beneficiary's account.