Is Your Estate Plan Ready?
There are four different ways to bequeath your heirs’ property. As no two families are the same, you should consider the following aspects in your estate plan when deciding which distribution strategy best suits your needs, values, and goals.
While reviewing your estate plan, deciding how to distribute your assets to your beneficiaries might be difficult. When deciding how to divide assets among heirs, it’s important to consider how and when each person can get their share. It is recommended that these terms be explicitly stated in your estate planning agreements.
Regarding estate planning, every scenario is unique, so something that works for one family might not work for another. There is no right or wrong way to divide an estate, but there are some things to consider to help you choose the strategy that best meets your needs, values, and goals.
Leaving assets unattended is the first strategy of an estate plan.
The easiest way to divide an estate is to give the assets to the heirs directly without limiting how they can use their inheritance. Even though this approach is typically the simplest, it could have some drawbacks. For example, estate heirs from wealthy families may be told not to work to support themselves but to rely on their inheritance since there are no rules about getting an inheritance. External risks like a divorced heir should be considered.
Even though some families might feel comfortable using this method, it is usually not recommended when giving a lot of money to younger family members or people who don’t know how to handle a lot of money.
Resource distribution progressively is the second tactic.
By slowly giving them assets, you can help your heirs manage their money without risking their entire inheritance. After placing their wealth in trust, families can decide how to share it. One example is to distribute a percentage of the trust to the beneficiary when they reach a certain age, such as 10% when they are 30, 20% when they are 35, and so on. Giving the recipient money when they complete a task, like reaching a specific academic milestone, is an additional option.
The third strategy is to leave assets in a discretionary lifetime trust.
Transferring property to a discretionary lifetime trust could be a better choice because the assets would stay in the trust as long as the beneficiaries lived. This tactic offers the highest level of protection against external threats such as divorce, legal action, and poor money management.
A family can leave a lasting legacy for future generations by putting assets in a lifetime trust. Beneficiaries must rely on the trustee’s judgment to decide on distributions, but the trustee may also be given specific instructions, such as to give money for a down payment on a house or to support a business venture.
The fourth strategy is combining distribution strategies.
A family may decide that the best thing to do is a combination of the above options, in which the heirs get some of their inheritance early and put the rest in trust for all time. This plan gives the beneficiaries of the trust unrestricted access to a certain amount of money so they can pursue their own goals and live their own lives without being totally dependent on the income from the trust.
If you have questions on this topic or others related to estate planning, please get in touch with the professionals at Quantum Strategies Wealth Advisory.
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