If you set up a trust, you have a specific goal for the beneficiary. For instance, grandparents will sometimes create a trust for a grandchild’s future tuition costs. They know that going to college can be prohibitively expensive, so they want their inheritance to prioritize their education.
However, one problem with doing this is that it is not that flexible. Say that the intended beneficiary wants to choose another career path, like starting a business or joining the military. Maybe when the time comes, there are other barriers preventing them from attending college, such as illness or needing to take care of a sick loved one. To account for unforeseen circumstances, is it possible to build some flexibility into the trust?
Using a discretionary trust
One key thing to remember is that you do not necessarily have to choose a purpose for the assets when you create a trust. If you use a discretionary trust, for instance, you just give the trustee the ability to make their own decisions about how to use the funds.
If you’re not sure about your loved one’s decision-making capacity, you can give that discretion to the trustee. You can give them the authority to allow payouts for anything they think is appropriate, whether that means college tuition, medical bills, buying a home, getting married, starting a business or anything else.
In this way, you give the trustee the ability to respond to future events in real time. It’s crucial to pick someone you trust to make wise decisions with the inheritance.
Creating your estate plan
Trusts are just one potential part of an estate plan to consider. Make sure you know about all of your legal options when drafting your plan by getting experienced estate planning guidance.