A lot of people think that estate planning is a one-way street. You decide how you want to distribute your assets, and you express your wishes in writing. The beneficiaries will have to accept your decisions, and when they receive their inheritances, they are on their own.
This is certainly one approach, and it can work out perfectly well for some families. At the same time, there can be extenuating circumstances. An asset transfer method that can be perfectly acceptable for one person may not be appropriate for the next.
Most people think that a will is the only asset transfer vehicle that you would use unless you are extremely wealthy. In fact, this is not the case, and an alternative of some kind would be a better choice in many cases.
Families With Minor Children
Minor children cannot handle their own funds, and you should accept this reality when you are planning your estate as a young parent. If you are in this age group and you have acted for the benefit of your family, congratulations, because you are more responsible than most.
A survey that was conducted earlier this year by Caring.com found that 24 percent of people between 18 and 34 had plans in place. The figure was 27 percent for individuals in the 35 to 54 age group, and most parents of young children are in one of these two groups.
Getting back to leaving an inheritance to children, a will is not the right transfer vehicle because there is no mechanism for ongoing asset management on behalf of minors. When you are planning your estate as a parent of dependents, you should discuss your options with an attorney.
If you have a living trust, you would be the trustee while you are alive. A successor that you name would assume the role after your passing. This individual or entity could manage assets on behalf of the child until they reach adulthood.
A testamentary trust is another possibility. This is a trust that is contained in a will, and it would become active after the passing of the testator.
Incentives
We have all heard stories about people with trust funds that fail to reach their full potential because they have no incentives. An incentive trust is an estate planning device that can be used to respond to this concern.
As the name would indicate, you include incentives that must be met before the beneficiary will receive distributions. Any stipulations can be included as long as you are not requiring the beneficiary to do something that is not legal.
Living Trust With a Spendthrift Provision
You may have concerns about leaving a significant direct inheritance to an individual that is not good with money. Someone with these proclivities that receives an inheritance through the terms of a will would be able to do whatever they want to do with the resources with no safeguards.
This is another situation that can be addressed through the utilization of a revocable living trust. You leave instructions when you create the trust declaration regarding the way you want the assets to be distributed after you are gone.
For example, you can instruct the trustee to distribute a certain amount each month until the beneficiary reaches a certain age. This would prevent bad-making on a large scale, and the principal would be protected from the beneficiary’s creditors.
Special Needs Planning
If you are going to be leaving a bequest to a loved one with a disability that is relying on Medicaid for health insurance, you should take a targeted approach. A direct inheritance can cause a loss of eligibility, and a supplemental needs trust is the widely embraced solution.
The trustee would be able to use the assets to make the beneficiary more comfortable without impacting government benefits. After the beneficiary’s passing, the remainder would go to a successor beneficiary that you name in the trust declaration.
Schedule a Consultation Today!
We are ready to spring into action if you would like to work with a Westport or Glastonbury, CT estate planning lawyer to put a plan in place. You can call us at 860-548-1000 to schedule an appointment, and you can use our contact form to send a message.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021, 2022 and 2023.
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