Trust funds allow parents and grandparents to ensure that children receive their inheritance slowly over time, rather than receiving it all at once at the age of 18. There are many factors to consider when creating a trust fund, but the impact of the trust on the beneficiaries is one of the most important considerations.
Structuring a trust is an individual process, and should be done with an appreciation for the family’s unique situation. For example, many people in their late teens do not have the responsibility or knowledge to handle a large inheritance, and their personal growth and achievement may be hindered by a windfall of cash. In addition, some teens go directly to college after turning 18, while others take a different path.
One common way to structure a trust fund with a large amount of money is to allow the trustee, who is in charge of managing the trust, to distribute it in three parts: the first when the child graduates from college, the second in the child’s mid-20s, and the final distribution when the child is in his or her early 30s. Until the trust is fully distributed, the trustee can apply it to the beneficiary’s education, healthcare and other expenses as outlined in the trust.
Placing heavy restrictions on a trust can be detrimental in many cases, especially as the beneficiaries get older. Although teenagers may be impulsive, parents and grandparents should trust that after a certain point, they will have the maturity to manage the money. Similarly, secrecy about the value and nature of the trust can cause beneficiaries to feel powerless and even resentful.
A skilled estate planning attorney can help individuals develop a trust that is in alignment with their wishes and the beneficiaries’ best interests.
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