Think back to when your children were little. When Aunt Patti used to give them $20 for their birthday, what did they do with it? Perhaps one stashed the money in their piggy bank, and the other rushed out to spend it. Some people are natural savers, and some are inclined to spend.
When creating your estate plan, consider if your children could handle a large amount of money. If you die in 20 years, could they handle it? What about if you die tomorrow?
Receiving a lump sum of money can be useful to a young adult, for things like putting down a deposit on a house. However, it can also be too much to handle.
A trust is a useful estate planning tool. These are some of the advantages:
- Control inheritance: Placing money in a trust allows you to pass it on in a controlled manner. You could stipulate monthly or yearly payments, or payments at key ages, such as 18, 21 or 25 years old.
- Provide for your grandchildren: You could also use a trust to ensure your grandchildren inherit something, even if your children mess up financially. It allows you to skip a generation by naming the grandkids as beneficiaries.
- Protect from creditors: Trusts also protect money from creditors, if you or your beneficiaries get into debt.
- Protect from spouses: A trust can ensure money stays with your descendants, not people they marry. It makes it clear that this is not marital property.
- Protect from taxation: Trusts have certain tax advantages over other forms of asset transfer.
To understand more about trusts, contact a Rhode Island estate planning attorney.They can help you choose the best option for you and your family.