If you put money into a trust when making an estate plan, you can have some say in how the beneficiary uses the money. For instance, a grandparent may consider putting money in a trust for a grandchild’s eventual college education.
One issue with trusts is that they can feel restrictive for the beneficiary. What if that grandchild does not want to go to college? What if they want to join the military or start a business? What if they have a family member with health troubles, so they forgo their education to be a caretaker and provide needed assistance? There are many potential reasons why they would not want to use the trust as intended.
Putting a trustee in charge
With a discretionary trust, though, you are essentially just putting the trustee in charge of the spending. They can decide when and how the money should be used. There is flexibility in this because the trust does not define exactly what that use looks like.
For instance, in the situation described above, the trustee may authorize a payout to the beneficiary so that they can use the money to start their own business. If the grandchild later changed their mind and went to college, the money could be shifted over to pay for their tuition.
The key is simply to find a trustee that you believe will act in the beneficiary’s best interests, allowing them to make wise choices for how the inheritance should be used.
Establishing a trust
You can use trusts in many different ways as part of an estate plan. It is important to understand the options that you have and the legal steps to take as you set up all of the documentation. Having experienced estate planning guidance can be highly valuable.
