A widower came into my office to create his estate plan. We had a great meeting, and eventually we got to the part where we talked about who would receive his assets after he was gone.
He said something I hear all the time: “After I’m gone, my kids can just split what’s left.”
“That’s certainly one option,” I told him. “Before you decide, though, let me show you another one.”
I explained that instead of leaving his inheritance outright to his three adult children, he could leave each of them their inheritance in a Trust designed specifically for them.
He wasn’t interested. “Nah,” he said. “Just split it equally.”
I didn’t argue. Instead, I asked him one question. “Your children are 22, 28, and 30. If something happened to you tomorrow, each of them would receive about $500,000. Think back to yourself at those ages. Would you have been ready for that?”
He chuckled. “I’d have spent it a lot faster than I earned it.”
When he came back the following week, the first thing he said was, “I’ve been thinking about what you asked me.” He smiled. “At 22? I absolutely would not have been ready for that much money. Honestly, even at 30 I probably wasn’t. Can we talk more about those Trust options?” That conversation has stayed with me because it highlights something I see every week.
Every person’s situation is different. Some people are planning for young children. Others have adult children who are already have children of their own. Some want to provide for grandchildren. Others are thinking about close friends, a sibling, a niece or nephew, or even a favorite charity. No two situations are exactly alike.
But regardless of who you’ve chosen as your beneficiaries, one of the most important decisions isn’t just who receives your assets. It’s how they receive them.
Most People Think There’s Only One Option
When most people picture an inheritance, they imagine something simple: Someone passes away. The beneficiaries receive their inheritance. End of story.
For some people, that’s the right approach. But it’s not the only one. Depending on your goals, an outright inheritance may be exactly what you want. Or you may prefer to leave assets in a Trust that can provide flexibility and protection over time. Neither approach is automatically right or wrong. The important thing is knowing you have a choice.
One phrase you’ll hear me say often is this: We don’t have a crystal ball. None of us knows what life will look like ten, twenty, or thirty years from now.
A beneficiary might someday be going through a divorce. Another could face a lawsuit or creditor issues. Someone else might struggle with a substance or gambling addiction. Others may become wildly successful and need a different level of asset protection than anyone expected. Or maybe they’re just not ready to manage a substantial inheritance.
Maybe none of those things ever happen. I hope they don’t. But life has a way of surprising us. That’s why I prefer building flexibility into an estate plan whenever possible.
It’s About Opportunity, Not Control
One thing people are surprised to learn about beneficiary Trusts is that they aren’t designed to control people. I don’t see them that way at all. To me, it’s about giving the people you love the best chance to benefit from everything you’ve worked so hard to build.
In many of the plans we design, a trusted person manages the beneficiary’s Trust at first. Later, the beneficiary can become the trustee of their own Trust when the time is right.
Rather than assuming today what someone’s life will look like decades from now, we create a plan that can adapt. Sometimes a beneficiary is ready sooner than expected. Sometimes it makes sense for someone else to continue serving as trustee a little longer. Families aren’t all the same. Why should their estate plans be?
A few months ago, a husband and wife came in to review an estate plan another attorney had prepared several years earlier. They had watched our free Estate Planning Webinar and, afterward, decided to pull out their own Trust for the first time in years.
When they arrived, there was a yellow Post-it note sticking out of one page. “Can we look at this section?” the wife asked. They had marked the paragraph explaining what would happen when their children inherited.
“In your webinar,” she said, “you talked about inheritance protection Trusts. Why don’t our kids have that?” I told them the only honest answer I could: “I can’t tell you why. All I can tell you is that you’re reading your Trust correctly.”
Their children would receive their inheritance outright. Maybe that’s exactly what they wanted. Maybe it wasn’t. They just never knew there was another option.
That’s why we believe education should come before decisions.
My Job Isn’t to Decide for You
Some people decide that an outright inheritance is exactly what they want. Others choose beneficiary Trusts because they value the flexibility and protection they can provide. Neither answer is right for everyone.
I don’t tell clients which option to choose. My job is to make sure they understand the choices before they make one. I’ve found that once people understand what’s possible, the right decision usually becomes much clearer.
If you haven’t thought much about how your beneficiaries would receive an inheritance, you’re not alone. Most people haven’t. You don’t have to know the answer today. You just need to know the question exists. Once you understand the options, making the decision becomes a whole lot easier.
Start with the Basics
Most people start by learning how estate planning actually works. That’s why we created our free, on-demand Estate Planning Webinar.
l’ll explain Wills, Trusts, probate, incapacity planning, inheritance protection Trusts, and the choices available to you, all in plain English, so you can make informed decisions before putting a plan in place.
👉 Register to watch the free webinar at your convenience.
If you’ve already watched the webinar and you’re ready to create or update your estate plan, we’d be happy to help you design one that’s built around your goals, your beneficiaries, and your choices.
