You want your children to be secure – even if you’re not here to help them. Trusts are often used exactly for that purpose.
You may be worried, however, about putting too much money in your children’s hands at once. Wealth can evaporate if it’s received too suddenly and the recipient lacks the maturity or skills to manage it. With that in mind, here are some benchmarks you may want to consider using to determine when and how distributions from your trust should occur:
Age milestones
Trust distributions can be tied to specific age milestones such as when your child reaches 18, 21 or 25 years of age. That can allow them to make important life choices with relative freedom, without putting everything in their hands at once until they have the financial literacy to deal wisely with their financial resources.
Educational milestones
You can also tie trust distributions to certain educational milestones, such as graduating from high school, college or vocational training. If you do this, however, you may want to include clauses that account for alternative life choices or needs. For example, you may want to make allowance for the possibility that your child may want to be a stay-at-home parent or may become disabled before they can finish their education.
Life events
You can also make stipulations for disbursements surrounding various life events. That can make it possible for your child to pay for their wedding, put a downpayment on the house or start a business. Trust provisions can also make allowances for a beneficiary’s health needs, should your child develop a disability or have some other medical issue that should be addressed.
These benchmarks can be tailored to align with your specific goals, values and circumstances – and they can be flexible enough to accommodate your child’s changing needs or unpredictable circumstances. Consulting with legal and financial professionals can help you structure a trust appropriately.
