You have a lot of options when it comes to gifting cash to your loved ones. You could give money to your children or grandchildren during your lifetime, leave them a cash inheritance, or set up a trust to distribute funds over the course of their futures.
Each of these options has its drawbacks. Any large cash gifts you make while you are alive can be taxed, meaning you would have to pay a fee if you go over the government’s set limit. Money left through a will is rarely saved and usually spent on whatever the beneficiary needs (or wants) most at that moment.
How can you be sure the funds will be spent according to your wishes? Typically, the best way to accomplish this is to create a trust that contains provisions to prevent misuse of the inheritance.
Trusts Are Better Than a Lump Sum
A lump sum payment will always run the risk of being misused—and not just by the beneficiary. Parents might take money intended for a minor child, or the assets may be placed in a bank account and later lost in a divorce settlement. The best chance at giving a relative financial assistance for a specific use is to set up a trust.
Trusts have several advantages over giving cash gifts, including:
- Privacy. Property and assets in a trust are exempt from the probate court process, meaning any amount you leave your relatives won’t become a matter of public record.
- Protection. You will have to name a trustee to oversee the funds left to minor children, preventing your heirs from spending the money all at once.
- Timed release of funds. Some trusts allow staged distributions, meaning the beneficiary will receive a certain portion of the funds on designated birthdays or events. For example, funds may be released when a grandchild graduates from college to pay back student loans, and again when she reaches her 30th birthday.
- Specific uses of funds. You have the ability to state exactly what the funds are for in the trust document, giving you greater influence on how it will be spent.
At Landskind & Ricaforte Law Group, our experienced estate planning lawyers can explain your options and help you decide the most effective way to pass your property to your loved ones. Contact us today through our online form to learn how we can be of assistance.