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.
On the other hand, if you make outright bequests your heirs might go through their inheritances quickly. They could squander their money or invest foolishly and wind up without needed funds.
A trust can prevent your descendants from following such an undesirable lifestyle. In effect, trusts let you pass along your financial acumen along with the finances.
Distributions can be set at modest amounts at certain times or left to the discretion of the trustee, who’ll manage the trust assets per your direction for the support of your beneficiaries.
One common method of distribution is to allot money at certain ages—for example 25, 30, and 35—or on events such as finishing a college education (it creates an incentive for your beneficiaries to do that) or on major life events such as marriage, birth of a child or the purchase of a home.
Think through all the possible impacts, though. Might receiving money just after college, for example, reduce their motivation to find meaningful work and instead use it to bum around Europe for a year or so? You’ll have to make that judgment based on your knowledge of your heirs.