As much as the estate planning process is about figuring out how to distribute your assets once you pass away, it’s also about control. If you don’t take charge of your estate planning, after all, your assets will be distributed in accordance with state law. In many instances, this distribution scheme doesn’t align with an individual’s wishes.
But the amount of control that you exert over your estate plan depends on what you want to accomplish. That said, many people are simply unaware of their estate planning options, which means that they miss out on opportunities to control their assets even long after their gone, which may also prevent them from giving their loved ones the future that they envision for them.
How can you maintain control over your assets?
There are several ways to go about doing this. Let’s look at some of your options:
- Incentive trust: Although you could leave assets to your loved ones outright without any conditions, you might find the use of an incentive trust to be more beneficial. Here, you condition the release of trust assets to a beneficiary on a triggering event. For example, your trust might specify that assets aren’t to be released to a beneficiary until they graduate from college, hold a full-time job for a specified period of time, get married, or even have a child. This gives you some control not only over your assets, but also how your loved ones can improve their lives.
- Spendthrift trust: This type of trust makes incremental disbursements to a beneficiary to ensure that they don’t squander away their inheritance. This type of trust can also prevent the beneficiary’s creditors from latching onto the trust’s assets right away. This gives you more control over how your estate’s assets are handled and ensures that they are better protected in the long-term.
- Discretionary trust: Similar to a spendthrift trust, a discretionary trust seeks to ensure longevity of the trust’s assets. The difference here is that the trustee who is responsible for managing the trust has the ability to determine when distributions should be made to named beneficiaries. With this type of trust, then, you’ll want to make sure you name a trustee who you can trust to make wise asset distribution decisions.
- Remainder trust: With a remainder trust, you allow the trust to make disbursement to a named beneficiary for the remainder of their life, but once that beneficiary passes away then the remainder of the trust is directed to someone else. This allows you to support multiple individuals or even a charitable cause in a single estate planning vehicle.
- Generation-skipping trust: Another way to control your assets in a way that ensures long-term benefits to your loved ones is to use a generation-skipping trust. Here, assets are distributed directly to your grandchildren, thereby bypassing your own children. Not only does this ensure longevity of your estate, but it might also provide some tax benefits.
Create the estate plan that’s right for you
This list is by no means exhaustive of your estate planning options. There are a whole host of trusts and other estate planning strategies out there that might suit your needs. That’s why it’s important that you research the possibilities and select those that are most appealing to you.
That said, don’t wait too long to start estate planning. Those who put it off end up being the ones who end up leaving an estate behind without clear instructions for distribution. This can create probate issues that are costly and highly conflictual. You don’t want that to happen, which is why now is the time to act.