How can you distribute assets to your beneficiaries over time?

| Nov 11, 2020 | Trusts

If you are setting up a trust, you will likely have concerns about how – and when – your beneficiaries will receive their inheritances. The value of your estate may be substantial, and you may want them to receive their shares of it over time, rather than as lump sums. Yet, you may have no clue how to make this arrangement work. To set it forth, you must put language in your trust that allows for the staggered distribution of your assets.

How staggered distribution works

Leaving your beneficiaries their inheritances outright may seem like the simplest option when creating your trust. Yet, this arrangement can be easier in theory than in practice. One or more of your beneficiaries may be irresponsible with money. Or, they may have substance abuse or gambling issues that could cause them to fritter away their share of assets quickly. Even absent these situations, you may want to make sure your wealth continues past the next generation.

To avoid leaving your intentions to chance, you must draft your trust using language that sets forth the staggered distribution of your assets. There are many ways you can space these distributions out. One common method of doing so is to arrange for beneficiaries to receive them at certain ages or milestones. Alternatively, you could stipulate that your beneficiaries receive periodic distributions after your death. The specifics of your arrangement are up to you.

Potential challenges of staggered distributions

Staggering your trust’s distributions may preserve your legacy, but it could also come with costs. For one, your trust will take longer to dissolve than if your beneficiaries received their inheritances in lump sums. Furthermore, your beneficiaries could receive smaller inheritances with this arrangement. The longer your trust exists, the more that legal and accounting fees could diminish its value. And its value may further reduce if your successor trustee demands payment for their continued services.

If you want your assets to disburse in stages, you must use binding and valid language in your trust to make your intentions clear. An estate planning attorney can help you make sure your arrangement is workable and sound.