FEDweek

Using a Trust in Estate Plan

Some people are reluctant to use trusts in their estate planning. You might think that leaving money in trust will make “trust fund babies” of your children or grandchildren. You may fear they’ll become spoiled brats who do nothing but spend income they haven’t earned.

In reality, a trust can prevent your descendants from following such an undesirable lifestyle. Distributions can be set at modest amounts or left to the discretion of the trustee, who’ll manage the trust assets.

On the other hand, if you make outright bequests your descendants might go through their inheritances quickly. They could squander their money or invest foolishly and wind up without needed funds.

If you do leave money in trust, you should avoid the common practice of providing for distributions at, say, ages 25, 30, and 35. At those ages, most people are best-served by finishing their education and establishing their careers. Dropping money into their laps at that age might reduce their motivation to find meaningful work.