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Should You Leave Assets to Your Children Outright or in Trust?

Deciding how to distribute your assets to your children is a pivotal aspect of estate planning, carrying implications that extend far beyond monetary considerations. The age-old question persists: Should you leave your assets to your children outright or in trust?

Outright Inheritance

Leaving assets to your children outright is the more traditional approach. This means they receive full control and ownership of the inheritance as soon as it’s distributed. While this may seem like a straightforward and uncomplicated solution, there are potential drawbacks to consider.

Inheritance in Trust

Choosing to establish a trust allows for greater control and customization over how your assets are managed and distributed. Trusts can be tailored to address specific family dynamics, financial concerns, and personal values.

There are many circumstances where opting for a trust may prove to be a more judicious decision:

Beneficiaries are Minors

Entrusting a lump sum outright to minor beneficiaries can pose practical challenges. Legal complexities arise, requiring a judge to appoint a guardian until the minor reaches the age of majority. To circumvent bureaucratic hurdles, opting for a trust managed by a designated trustee until a more appropriate age is a preferable alternative.

Beneficiaries are Young Adults

For individuals aged 18 to 21, it may be prudent to manage their inheritance within a trust until they reach a certain age, especially if they are under 25 at the time of inheritance.

Beneficiary with Addiction Problems

For beneficiaries struggling with addiction, bequeathing a lump sum can worsen their issues. Opting for a trust establishes a protective barrier against the potential misuse of funds.

Heirs are Financially Immature

In cases where heirs display financial immaturity, leading to potential reckless spending, placing the inheritance in a trust—with careful consideration of trustee selection—becomes a sensible, long-term strategy.

Critical Considerations for Trusts

When opting for a trust, the selection of a trustee is paramount. Trustees can be individuals known and trusted by the grantor or a corporate trustee. The choice between an outright inheritance and a trust demands careful consideration of various factors. If a trust is selected, the roles of trustee selection and distribution options are pivotal in ensuring the long-term well-being of beneficiaries and the fulfillment of the grantor’s wishes.

Reach out to Independent Trust Company for expert insights and assistance in making informed decisions regarding trusts and inheritance planning. Independent Trust Company is licensed and headquartered in South Dakota helping families throughout the United States access and benefit from the numerous advantages of South Dakota trusts.