When poorly structured inheritances lack financial controls or supervision, it can result in inappropriate spending and wasted money. This is why so many parents have established trusts for their older adult children. Thankfully, trusts can be easily created in California, and when structured wisely, they can benefit all parties involved.
What is a trust?
A trust is established when one person creates a financial mechanism that allows the other individual to use money or other financial assets. However, there are guardrails placed around this trust that prohibit the entire sum from being liquidated immediately. These guardrails may include things like a beneficiary meeting educational requirements, obtaining a certain age, limiting the amount that can be spent and more.
What are the benefits of establishing a trust?
Trusts come with many benefits when established with the help of appropriate legal counsel. These benefits include:
- Ensuring that an adult child is of the right age or maturity in order to access the money
- Protecting the fund from being immediately liquidated
- Ensuring that a responsible, trained adult is monitoring the assets of the trust and prohibiting them from being used inappropriately
- Incentivizing certain life goals, like having a stable marriage or obtaining an appropriate education
- Allowing for clear guidance on how a trust should be spent, thus ensuring that it is used according to the wishes of the original owner of the financial assets
Many families find that establishing a trust is unquestionably worth it because it can help to protect an inheritance and the lives of their children. A trust allows parents to leave a legacy for their children while helping them be responsible spenders.