Posted on March 24, 2021

Controlling Unexpected Family Situations: Trusts Can Be a Perfect Solution

Often in life we face challenging family situations that impact our lives, events that are often out of our control, things like:

  • An adult child dealing with addiction
  • An adult child getting divorced
  • An adult child passing away
  • The fear of mental incapacity

Any of these scenarios can cause uncertainty over your perceived lack of control, affecting your money and your decision-making ability.

There is a common solution for each scenario, thankfully, and that is setting up a Trust.  

How a Trust Works for You 

Think of a Trust as a “gift with instructions.” It’s like giving a gift to someone and saying exactly how that gift is to be used. Restrictions can be written into a Trust that require the assets to be used exactly as you direct. 

It’s these restrictions that make Trusts so effective. You get to say:

  • Who benefits from the Trust (the beneficiary). A Trust can have one or more beneficiaries.
  • Name the person that will manage the Trust assets (the trustee) and make sure it’s used only for the beneficiary or beneficiaries.
  • Direct the trustee with regard to managing Trust assets: when to give them and how they should be given to the beneficiary or beneficiaries.

How a Trust Helps in 4 Difficult Family Situations 

1] Your adult child is threatened by addiction.

You want to make sure your adult child is financially supported but protected from wasting or losing whatever you might want to give them.

  • Name your child as the beneficiary of a Trust; appoint a sibling, aunt or uncle or another responsible individual as trustee. 
  • The trust funds would be designated for support of your daughter or son, but the trustee could be instructed not to give them access to the assets until you’ve specified; this can prevent the person from wasting the funds or using them to support their addiction. 
  • It ensures the funds would last for an extended period of time. 

2] Your adult child is or may be involved in a nasty divorce.

To prevent leaving an inheritance for your adult child and then seeing some or all of it go to an ex-spouse: 

  • A Trust would direct the money to be used only for their benefit.  
  • The Trust would keep money insulated and out of the reach of the ex-spouse.

3] Your adult child passes away.

If your daughter or son passes away and has their own children, you can ensure your grandchildren receive their inheritance and the surviving parent (your son-in-law or daughter-in-law) does not control the funds and use it on a new spouse or family.

  • A Trust would make sure your grandchildren’s inheritance is used for their sole benefit.
  • One of your other children or a responsible friend or advisor could be appointed trustee to manage the funds. 
  • The funds would be available for the health, support, maintenance, welfare, education and entertainment of your grandchildren.
  • At a certain age, your grandchildren could receive the funds outright from the Trust or the funds could be held indefinitely depending on how you choose to structure the Trust. 

4] The fear of mental incapacity.

How can you make sure someone can quickly step in to take over managing your finances if you become mentally incapacitated at some point in the future?

  • A Revocable Living Trust allows you to hold your assets in Trust and serve as both the trustee and beneficiary. 
  • If your mental capacity is compromised, you would remain the beneficiary but the person you named as the alternate trustee (an adult child or trusted advisor) would assume that role and manage the Trust for your benefit.
  • This approach can be easier than transferring management powers via a power of attorney document. 
  • It also avoids probate after you pass away which can save time, money and aggravation in an otherwise difficult time.

Trusts are a vital part of estate planning, an effective tool that allows you to maintain control over how your money is protected and distributed to your loved ones.

Contact Price & Price to learn how you can set up a Trust as a solution to your family’s difficult situations.

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