Some residents of Kansas City may have looked into the possibility of creating a will or trust as a means of passing on their assets to their loved ones. However, they may have concerns about doing so, particularly, if they are unsure that their heirs will wisely handle their inheritance once it is received.
When a person creates a will leaving money to his or her loved ones, once the person dies and the money is inherited, that is it — the heirs receive their inheritance and can do with it whatever they like. But, with a trust, there are ways that the creator of the trust can protect his or her heirs from running into problems with their inheritance down the road.
For example, if there are concerns that a young heir will squander all of his or her inheritance at once, it is possible to set up a trust to dole out a percentage of the inheritance in payments over time, like when the heir is 25, 30 and 35. Another option is to make the inheritance contingent on an event, such as graduating from college.
Of course, things in life do not always work out so neatly. For example, say a person leaves his or her child an inheritance in a trust, and it commingles to become part of the marital estate. If she dies, marital property — including the inheritance that was commingled with marital funds — will fall into the hands of her husband. After that, if her husband marries for a second time and then subsequently passes away, the inheritance will pass on to the new spouse. One way to protect an inheritance through a trust and keep it in the family, the trust can dictate that any trust assets belonging to their child remaining after their child’s death will pass on to their grandchildren.
As this shows, through proper trust planning, a trust can be created in a way that not only meets the wishes of the person who created the trust, but also can protect the person’s heirs. But, creating these types of trusts can be complicated, so it may be necessary to seek the help of a professional experienced in trust and probate administration before proceeding.
Source: CNBC, “Heir tight: The dos and don’ts of creating rock-solid trusts,” Jennifer Woods, May 27, 2014