Structuring the Distribution of your Inheritance to your Children
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Structuring the distribution of your inheritance your children in several steps, often through a trust (whether in the will with a pour-over trust or in a separate trust instrument), is a common estate planning strategy. A structured distribution, over set time intervals, offers many benefits, primarily focused on protecting assets and ensuring they are more appropirately available for the use and benefit of your children. Among the key reasons why you might choose to distribute your inheritance in several steps:
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Protecting Immature or Financially Irresponsible Beneficiaries: A single, large sum of money can be overwhelming for a young adult or someone who struggles with financial management. Staggered distributions, such as a portion at age 25, another at 30, and the remainder at 35, can give them time to learn how to manage their inheritance responsibly without risking the entire amount at once.
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Protecting Against Creditors and Divorce: Assets held in a trust for a beneficiary are generally protected from their personal creditors or from being divided in a divorce. If the inheritance is given as a lump sum, it can become part of their personal assets and may be subject to these claims.
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Providing for Specific Needs: A trust can be used to control how funds are spent, ensuring they are used for things you intended, such as education, a down payment on a home, or medical expenses. This is particularly useful for beneficiaries with special needs or those who might be vulnerable.
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Maintaining Family Unity: In some cases, a staggered distribution can help prevent conflict among siblings. For example, if there's a significant age gap, you might structure the trust to provide for the younger children's education while the older children receive their initial distributions. This can help ensure that everyone gets an equal share in the long run, even if the timing is different.
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Asset Preservation: Staggering distributions can help preserve the principal of the inheritance over a longer period. Instead of a single withdrawal, the funds remain invested within the trust, potentially continuing to grow and provide a source of income or funds for the beneficiary's lifetime.
While an outright distribution (a single lump sum) is suitable for mature, financially responsible beneficiaries, a staged distribution via a trust offers a greater level of control, protection, and flexibility. It is a legal mechanism that improves upon the application of your inheritance in a way that truly benefits your children and future generations.
Our law firm can help you plan for the future, including the preparation of a well-drafted will and other estate planning documents, designed to better serve your children's future well-being, as well as dealing with the legal demands associated with the passing of a loved one. We welcome you to contact our law firm today at 403-400-4092 or via email at Chris@NeufeldLegal.com to schedule a confidential initial consultation.
IMPORTANT NOTE: This website is designed for general informational purposes. The site is not designed to answer specific questions about your individual situation or entitlement. Do not rely upon the information provided on this website as legal advice in respect of your individual situation nor use it as substitute for individual legal advice. If you want specific legal advice, you need to engage a lawyer under established legal engagement procedures that have been specifically agreed to by that lawyer.
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