The Power of Trusts

Mention trusts and most people automatically think of support for surviving spouses and education funding for children.  Good things to be sure, but a thoughtfully designed trust can do much more!  It can help ensure that money left for heirs will be constructively used…according to your wishes. 

Are your children mature?  All too often the answer is ‘not yet.’  One solution is to authorize your trustee to distribute income in its discretion and to couple that with principal distributions over a certain period of time…say ten or fifteen years.  This approach allows children to learn (and recover) from mistakes and gain sufficient maturity to handle larger sums at a future date. 

Are your children financially responsible?  Some adult children are destined to have debt and other financial issues throughout their lives.  Fortunately, spendthrift clauses can be put in place in order to protect them against creditors and wayward spouses.  A similar approach can be taken when substance abuse issues are present. 

Are there home ownership, charitable giving, or other important priorities?  Whether one or more of these apply to your situation, your trust can be crafted in a way to provide specific direction and guidance about when and why funds can be used. 

Is your child interested in mission or other types of humanitarian work?   Some adult children are strongly committed to these callings but find it challenging to adequately self-support.  Financial and family circumstances permitting, a well-written trust can be an excellent source of supplemental income.  

Are your children too well off for their own good?  Some parents fear that a looming inheritance may be a disincentive for children to become productive, responsible members of society.  Enter the incentive trust!  These are designed to permit distributions only when a beneficiary attains a certain income threshold.  Naturally, language can be included that makes exceptions for bona fide illness and disability. 

Is your child entrepreneurial?  If so, you can earmark money and authorize your trustee to make distributions to start a business once certain conditions or parameters are met.  

As you can see, a trust is a powerful, flexible estate-planning tool.  When well written, your trustee can act as a surrogate financial parent, thus able to care for your loved ones much as you might if still around. 

By conferring with a trust specialist and legal advisor, your wishes and objectives can be incorporated into your trust document.

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