Berman & Asbel, LLP

Trusts as part of an estate plan

Pennsylvania residents who would like to pass their assets to family members, either during their life or at their death, may recognize that trusts can be a valuable tool to effectuate these goals. Trusts are an important part to estate planning because they allow individuals to create additional controls that are not available through disposing of assets through wills.

Trusts that are structured carefully can help protect heirs against bankruptcies, untoward advances by friends and acquaintances and other financial challenges. Trusts can also be constructed in a way that provides for the special needs of dependents. The settlor of the trust can determine when to provide distributions to the beneficiaries of the trust. One option is to have age-based payouts, providing beneficiaries with a certain percentage of the assets as they reach certain ages. Financial advisers often recommend that settlors wait to provide distributions until the beneficiaries are at least 25 years old.

Another way to distribute assets is to provide for payouts after certain intervals after the settlor dies. In some situations, there are problems that arise in the family that require special considerations. For example, one beneficiary may have a drug problem or difficulty in managing finances. Trusts can be established to require certain conditions to be met before a distribution is made. For example, the beneficiary may have to prove that he or she has not consumed drugs or alcohol for a certain period of time prior to a payout. If the person has a problem of maintaining a job, steady employment may be a prerequisite to receiving a payout.

Individuals who would like to provide an inheritance to others but would like to control how and when distributions are made may decide to talk to an estate planning attorney. There are a variety of trust types that the attorney can discuss and explain.

Source: CNBC, "Heir tight: The dos and don'ts of creating rock-solid trusts", Jennifer Woods, May 28, 2014

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