We may work a lifetime so that we have an inheritance to pass on to our children and grandchildren. However, most people in Texas do not want to see a young adult squander a large inheritance. If you leave a young adult a sum of money in a will, they will receive their inheritance as one lump sum to do with whatever they wish. For this reason, some people choose to leave their young heirs an inheritance through a trust.
Periodic distributions in a trust
In a trust you can include provisions that make multiple payouts over a period of time. For example, the provision may state that payouts will be made when the beneficiary is 25, 30 and 35. Another option is to have distributions made every five years following your death. This can help young adults better manage a large inheritance.
Contingencies on an inheritance
In addition, an inheritance can be tied to a contingency in the trust — that is, an event that must occur before the beneficiary can receive their inheritance. For example, if a beneficiary has an alcohol or drug dependency, a condition can be placed wherein they must be clean for a certain time period before inheriting. Other conditions include proof that the heir is employed or making payouts from the trust equal to the beneficiary’s salary.
In addition, in your trust you can earmark inheritance funds to be used for a specific purpose, such as paying for higher education, starting a small business or purchasing a home.
Ensure your trust is clear and concise
If you plan on including periodic distributions or contingencies in your trust, it is essential that the terms of the trust are clear and concise. This not only makes it easier for the trustee to carry out the terms of the trust, but it also makes it more difficult for a beneficiary to challenge the terms of the trust. Estate planning attorneys in the Bedford area may be a useful resource for those who have further questions about trusts.