Passing on your assets and estate to beneficiaries can seem like a straightforward process, but people who might prey upon this fragile transition, such as creditors and divorced spouses, can easily take advantage of it. Using a discretionary trust decreases the risk of assets landing beyond your beneficiaries’ pockets, and an estate attorney, can help. This kind of trust also puts you in more control over how your estate is handled. These are the top benefits to investing in a discretionary trust.
What Is a Discretionary Trust?
The point of a discretionary trust is to protect your assets from external predators and, potentially, the poor management of your beneficiaries. It gives the trustee — most likely you — the power to distribute funds and assets in the exact manner you deem necessary. You can place certain terms on your assets so that they are not passed on to beneficiaries unless they meet certain qualifications, such as an age or a specific scenario (like medical costs).
Can a Beneficiary Claim Funds?
A discretionary trust gives you comfort by placing direct control of your belongings in your hands. At the same time, it keeps beneficiaries from taking any. Only you can decide when the assets are given to beneficiaries.
What Are Advantages to Withholding Funds From Beneficiaries?
If you have trustworthy, dependable beneficiaries, this may seem like an odd decision. Why keep it from the eventual rightful owners? There are several reasons, including beneficiaries who are not yet old enough, beneficiaries who have a history of irresponsibly handling funds, or beneficiaries that are mentally impaired.
Can the Trustee Use the Fund?
Since the trust is specifically for passing things down to loved ones or friends, the trustee cannot access any of the funds once they are placed in it. This is especially helpful in protecting your assets from creditors. A trustee remains in full control of the assets and in distributing them. It’s important to note, however, that a trustee who does not uphold the integrity of the trust as it was originally made can be subject to removal and replacement.
Delving into the details of a discretionary trust or any other form of estate planning can be a challenge. The more you have to pass on, the more complicated it can become, with more consequences for your beneficiaries who have to deal with creditors. Consulting with a lawyer about the best type of fund for your needs can make the transition process smoother when the time comes.