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Staggered Disbursement Can Help Prevent Misuse of Inheritance

Daryll Pomey Orat - Thursday, June 04, 2015

One way to prevent large inheritances from completely sucking out a child's ambition is to ensure that the funds are disbursed in a staggered manner. You can choose, for instance, to make sure that the child receives funds during certain stages of his life.

There are ways that you can design your trust to do this. Sometimes, parents prefer that children have the money, when they reach certain goals in their career. For instance, your trust might require that your child earn a certain amount of money before receives the next disbursement of funds from the trust. If your child earned $80,000 in income this year, your trust can disburse the same amount of money to him. This can help keep your child's goal-setting and reaching skills and ambition alive.

You can also design your trust to distribute only income from the trust assets to your children over a period of time, and distribute the principal when the children are much older. A 20-year-old will have very different ideas about what to do with money, compared to a 30-year –old or even a 40-year-old. Therefore, limit the amount of money that passes on to your children when they are younger, and let the bulk of your inheritance pass on to them when they're much older, more financially sophisticated, and much less likely to squander it.

There are several ways that you can design a trust to reduce the risk of heirs squandering away their inheritance and losing their ambition and spirit. Speak to an estate planning lawyer in San Jose about establishing a revocable living trust that'll manage your assets for you, and earn an income while you are alive, and manage the distribution of your estate in the manner you have specified, after you.

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