Setting goals when planning estate distribution

Oftentimes, planning the distribution of one’s estate can be as simple as leaving all the wealth to one’s children equally. But depending on the size of the estate, as well as the grantor’s desires and concerns, various other approaches and solutions should be explored. 

It is not unusual to leave the entire estate to one’s children. But how much of the estate is too much? There is obviously no single answer to this question. Parents who wish to instill in their children certain work ethics, may wish to limit their children’s inheritance to encourage and force them to earn their own wealth. Additionally, the grantor may wish to provide for grandchildren or other relatives and friends as well as donate to their preferred charitable organizations. In those situations, the estate would be split between the children and other relatives as well as the charitable causes close to the grantor’s heart. 

Regardless of whether the entire estate or only part of it is left to one’s children or other relatives, the grantor may wish to set certain goals to be achieved with the inheritance or certain conditions to be met before any inheritance is distributed to the beneficiaries. 

Setting a certain amount of money for educational purposes is not uncommon. In that case, the funds would remain in trust for the educational needs of a beneficiary. The terms of the educational trust can be very broad, allowing the trustee to control the amount and timing of the distributions. Alternatively, stricter or less rigid rules can be designed to control the distribution to the beneficiary, such as a level of education to be provided for, the length of education, the age of a beneficiary, or even required grades. 

Sometimes, the grantor wishes to provide for a beneficiary with special needs. The terms of the special needs trust are determined less by the grantor’s desires and more by the need to comply with the applicable laws.  

Occasionally, the grantor may be concerned that the inheritance could be assumed by the beneficiary’s creditors if distributed directly to the beneficiary. In those situations, a properly drafted irrevocable trust could protect the assets from the reach of the creditors. Such irrevocable trusts can ensure financial security for the beneficiaries by providing regular income while at the same time providing asset protection. 

Oftentimes, the grantor may be concerned that the beneficiaries are too young to inherit significant wealth outright. Consequently, the trust can be scheduled to provide periodic distributions until the beneficiary reaches a certain age. While the assets remain in trust, they can be used for the beneficiary’s health, maintenance, and education, or any other purpose designated by the grantor. 

Frequently, the grantor wishes to incentivize certain behavior and thus makes the funds available to the beneficiary upon the occurrence of some event, such as graduating or starting a business. 

Commonly, the grantor wishes to make a charitable distribution and leave some of the estate to a charitable organization close to their heart. 

Estate planning is an ongoing process and one’s family and fiduciaries should often be involved in it. Consequently, the estate planning documents should be reviewed, revised and updated according to the personal circumstances. 

Natalia Vander Laan is a Minden attorney.