Leaving assets to a minor beneficiary or a beneficiary who needs protection (e.g., disabled beneficiary, spendthrift beneficiary, incapacitated/incompetent beneficiary, etc.) usually means that the assets should be left in a trust for such beneficiary’s lifetime or until such time as the beneficiary regains competency or is of sufficient maturity to handle the assets. A trust is a fiduciary arrangement that allows a trustee (a third party, not usually the beneficiary), to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be drafted to deal with many situations and issues (e.g., minority, disability, spendthrift, creditor issues of a beneficiary, etc.) and can specify exactly how and when the assets benefit and pass to the beneficiaries.
Absent a trust, a minor beneficiary will get the assets when he or she reaches the age of 18 in most states, not an age of financial maturity for most. Imagine an 18 year old receiving an inheritance of thousands to hundreds of thousand of dollars – how soon will that 18 year old have no assets? Perhaps there is a beneficiary who is disabled, is receiving governmental benefits and the receipt of assets outright by him or her or in a trust which is not specifically designed for this situation can disqualify the beneficiary from receiving such benefits. In such a situation, a properly drawn and established trust can benefit the beneficiary while avoiding disqualification.
If a beneficiary has a drug or alcohol problem, has major creditor issues, has a spouse who you do not trust or like or the beneficiary is terrible with assets, how do you protect him or her? A trust can protect the beneficiary from himself or herself or from his or her problems which are beyond his or her control, provide for such beneficiary and such protection can last for the lifetime of the beneficiary.
An independent Trustee appointed for such a trust can be the heavy who can easily say no or who can follow the terms of the trust dispassionately without familial ties. A trust is a necessary step to provide protection, management and control for a beneficiary who needs the help.
Contact Weaver, Bennett & Bland at (704) 844-1400 to schedule a FREE 1 hour initial estate planning consultation with one of our experienced Charlotte estate planning attorneys who can help you with either your North Carolina or South Carolina estate planning needs.