There’s no question that estate planning is complicated and can be stressful. As you prepare for your family’s future, you’ll be faced with a lot of questions. Things like the guardianship of any minors under your care, the distribution of your assets, and the long-term care of those who depend on you, are all parts of crafting an estate plan that works for you.
Understanding the different tools at your disposal, and the ways in which those tools can be customized to meet your needs, is critical. Indeed, there are a number of options available that allow you to personalize your estate plan and ensure your loved ones are cared for in the long term. One of these tools, the trust, offers a tremendous degree of flexibility and can be tailored to meet your specific needs and goals. As you’re crafting your trust, one question that comes up often is: “what is a good ‘financial maturity’ age when leaving money to a beneficiary under a trust?” As with most questions in estate planning, the answer is complicated, and requires analysis of a number of factors.
What Is A Trust?
Before we address our specific question, let’s back up and talk about what a trust is, exactly. A trust is a versatile legal arrangement that allows someone — the “grantor” (or “settlor”) — to designate another person or group — the “trustee” — to manage and administer selected property or assets on their behalf, in line with all instructions set down by the establishing trust documents. The assets in a trust are held on behalf of a beneficiary or beneficiaries. The trustee is a fiduciary, ethically obligated to manage the assets solely for the benefit of the beneficiary or beneficiaries.
A trust can be either inter-vivos, also known as a “living trust,” or testamentary, meaning the trust is created by a will. A trust is a versatile instrument. Unlike a will, a trust allows the grantor to customize the financial distributions from the trust to the beneficiary or beneficiaries.
Trusts can be revocable or irrevocable. A revocable trust is one that can be altered or revoked by the grantor. An irrevocable trust, as its name implies, is a trust that cannot be changed. For the most part, when we talk about trusts in estate planning, we’re referring to revocable inter-vivos trusts.
Using A Trust To Hold Funds On Behalf Of A Minor
As we’ve discussed in the past, a revocable living trust is one means to hold property for the benefit of a minor who cannot inherit property in their own name. Unlike other ways of passing property to minors, a trust does not require court oversight regarding the use of the funds. What is more, a trust can include stipulations that are not available in other instruments, including the ability to designate the age at which a beneficiary receives the funds, rather than relying on the statutory default that a minor receives legal ownership of funds at age 18.
When Should A Trust’s Beneficiary Receive Distribution Of Funds?
Whether a trust is established for a minor child or an adult, a trust allows for a great deal of freedom in determining when and how funds will be distributed. A trust can allow for funds to be distributed in smaller increments, annually or for specific purposes such as education or the purchase of property.
The decision of how, and when, to distribute funds is an individual one. It depends on the age of the beneficiary and the goals of the grantor . If a beneficiary is likely to be a spendthrift, for example, a grantor can consider trust distributions of smaller amounts on a regular basis. Or, a grantor can authorize the trustee to use the trustee’s best judgment to authorize distributions for purposes that the grantor approves, such as tuition, the purchase of a home, or childcare. A trustee can also be empowered to “shut off” distributions if a beneficiary has a problem with gambling or substance abuse, then resume the distributions as appropriate.
Keep in mind that as the complexity of your distribution plan increases, so too do the costs associated with administering your trust. If you choose to use a professional as your trustee, requiring that person to make judgment calls and monitor the status of distributions can run up fees and eat into the amount you originally intended to set aside. If you choose a nonprofessional, such as a designated guardian or trusted family member, you’ll be relying on that person’s judgment to carry out your wishes, and adding complexity to distributions might place an undue burden on them.
Choosing a set age at which your beneficiaries receive their distribution is an easier way to manage your trust. Although many trusts still use age 18 as the distribution date, more and more individuals are choosing to make distributions later, perhaps allowing for educational and living expenses to be paid beginning at 18 but saving larger distributions until age 20, 25, or even later.
How you set up your trust is personal, and you shouldn’t do it alone. Getting expert advice from a professional who understands the risks and benefits of various forms of distributions can help you set up an estate plan that works best for you and your family.
Ready to Discuss Estate Planning or Probate With a Chicago Attorney?
Whether you’re planning for your family’s future or preparing to deal with a loved one’s estate or assets in probate, an experienced legal professional can help make the process less daunting. That’s where the experienced and compassionate attorneys and staff at the Law Offices of J. Jeltes, Ltd. can help.
As you get started with estate planning or prepare to update your current documents, our team can help prepare basic wills, trusts, powers of attorney, and living wills (also known as advance directives).
Need a guide in navigating the challenges that may arise during administration of your trust? Our attorneys have experience with both living and testamentary trusts, and can help you understand the trust instrument that’s best for you.
Founded in 2009 and offering more than 20 years of combined experience, the attorneys and staff at the Law Offices of J. Jeltes work together to provide skilled, efficient, and affordable legal representation to individuals and families going through major life transitions in Illinois. Don’t hesitate to contact us whenever you’d like to begin the conversation.