When you use a will to leave someone an inheritance, you’ll typically specify what assets that individual is entitled to receive. These may be tangible assets, such as giving someone a home, a car, a guitar collection or something else of this nature. But they could also be financial assets, such as giving someone control over bank accounts or leaving them money from investments.
When passing on financial assets, you may find yourself wondering how they’re going to be used. Are your heirs or beneficiaries responsible with their money? Are they going to use that money for things that you support, like getting a college education or buying a home for their family? Or do you worry that they will waste the money on things like a drug addiction or making frivolous purchases?
If you do struggle with some of these concerns, it’s important to know that there are ways to control how your money is used after you pass away. One option is to use a trust.
Setting up a discretionary trust
For example, you can craft a discretionary trust. You’ll fund the trust with the money that you’re going to leave to a beneficiary. You name them as the official beneficiary of that trust. They will not own the money until it is distributed to them.
The next person you’ll appoint is a trustee. This person is actually in control of approving trust spending. They are the one who will have the final say on whether or not the trust is going to pay out, so you can choose someone that you believe will make decisions you would approve of.
But a discretionary trust is not the only option. You can also set trusts up to use money for very specific purposes. Above, it was noted that you may want your heirs or beneficiaries to use the money for a college education. You can certainly create a trust with regulations stipulating but that your money has to be used for college costs. This could include tuition, room and board, books and supplies, and much more. These trusts lack some of the flexibility of a discretionary trust, but they do give you the control you’re looking for.
No matter what you want to do, there are legal tools that can help you to accomplish your goals. Just be sure you know exactly what steps to take by seeking legal guidance as you craft your estate planning approach.