Most people considering an estate plan to pass their assets to their beneficiaries struggle with competing objectives. While it is natural to want to use one’s legacy to provide increased financial security for a loved one, those passing on a legacy may be concerned about undermining a loved one’s work ethic. Those creating an estate plan also are increasingly concerned that their beneficiaries are protected from financial missteps according to a new Reuters article.
The estate planning mechanism routinely used to protect beneficiaries from imprudent financial decisions is a trust. Although designed to limit the depletion of a beneficiary’s financial legacy have historically focused on those who are young, the Reuters report indicates that a growing number of trusts are limiting access to some or all of the assets in a trust until the beneficiaries are much older. Rather than authorizing the distribution of the assets in a trust when a beneficiary becomes an adult at age 18, many trusts grant access to assets in stages up to the age of thirty or even beyond.
Another common approach to protect beneficiaries involves limiting access to the trust funds until certain milestones are achieved. These milestones may include college graduation, birth of children, the purchase of a family home, marriage and other major life events. These types of trust provisions have a number of advantages because they preserve your legacy for future generations and ensure that your beneficiaries will have available funds when they need them in the future. When a trust is structured this way, it can also help promote your values and moral principles without undermining the incentives of a beneficiary to seek educational and career success.
However, there is a disadvantage to this type of trust that essentially amounts to a flip side to its benefits. When a party imposes too many conditions or uses extensive milestones, it may feel to a beneficiary that they are being excessively controlled by the decedent. Our New Mexico estate planning attorneys set up many trusts so we work to provide insight to our clients regarding the proper balance of protective measures and milestones. We often draw on practical experience about the downside of provisions that intrude too extensively on the autonomy and self-determination of beneficiaries. While the person creating a trust is the ultimate arbiter of when this balance has been reached, we can provide knowledge and insight based on setting up hundreds of other trusts.
The above information is provided to illustrate general principles of law and should not be interpreted as a specific legal opinion on an individual case. You should contact experienced legal counsel to get specific legal advice that is based upon your specific circumstances.
The experienced New Mexico Estate Planning Lawyers at Jay Goodman & Associates, PC offer a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your situation. Call us today to schedule your free consultation at (505) 989-8117 to learn about your rights and options.