When you create an estate plan, you pick beneficiaries for specific assets. For instance, say that you have a bank account with $500,000 in it, and you want to leave $250,000 to each of your adult children. The estate plan gives you a variety of tools you can use to do this, the simplest of which is just assigning the assets in your will.
But if you do this, your adult child could theoretically use their $250,000 for anything that they want. You may be concerned that they won’t use it in a way you would approve of. Maybe they have habits or lifestyle decisions that you don’t agree with. Perhaps you’re just worried that they will spend it frivolously. Is there any way to instruct them on how to use the money?
You could put it in a trust
You can leave instructions with your estate plan if you want, but your beneficiaries wouldn’t be legally obligated to follow them.
If you want to actually change how they use the money, you can put it in a trust. You can then instruct that the trust can only pay out for certain reasons. For instance, you could say that the beneficiary is allowed to make withdrawals to pay for college tuition, but nothing else. You could expressly state that the money should be used to buy a home or start a business.
When you use a trust, you do have control over how the money is used in the future – and you choose a trustee to ensure that it happens.
Setting up your plan
Trusts are just one of the estate planning tools that you may want to consider at this time. Be sure you understand exactly what options you have.
