With a sprinkle trust, you can provide for each family member, according to his or her needs, while you avoid gift and estate tax. You can name a number of trust beneficiaries, including your spouse, your children, and your grandchildren.
The trust documents likely will state that the income from the trust assets, and possibly the trust assets themselves, can be used for the support and maintenance of the beneficiaries. Distribution of trust income and principal is entirely at the discretion of the trustee.
The key to a sprinkle trust, then, is the selection of a good trustee or trustees. You or your spouse shouldn’t be trustees and neither should a child or grandchild. You may choose an in-law, a friend, a professional adviser, or an institutional trustee. Besides absolute faith in the trustee’s integrity, common sense and a knowledge of your family situation are the paramount qualifications.
If you choose co-trustees, try to pick people who are compatible, so deadlocks can be avoided. Include a provision for selecting a successor trustee in case the original trustee dies or resigns.
** For More Information on all the different types of Trusts and which one may be right for you, see item # 8 below. **
