For parents with significant assets, it is often better to create a trust rather than a will alone.
When creating a trust, one must decide at what age their children will begin to receive funds. Below are some common strategies for selecting trust disbursement.
One lump sum at a specific age
This option is common, though usually less advised. With this strategy, the child or children receive full access to their funds in the trust upon reaching a certain age. Common ages to choose are 22 — the age at which it is expected they will have an undergraduate degree — and 30, as it is assumed they will be established and responsible.
Percentages given in even intervals
Here, the parents select a starting age where a percentage of the funds will be given to their child. From there, regular intervals are set when the child gains access to another percentage of the funds. An example of this would be 25 percent at ages 20, 30, 40 and 50. The idea behind this is to spread out the disbursement of funds to ensure it is not all spent at once.
Use life goals instead of ages
When selecting ages, maturity is often a major concern; parents want their children to gain access to funds when they are mature enough to use the money properly. However, age is not always a solid indicator of maturity. Parents can designate life goals or milestones. For example, 25 percent upon marriage, 25 percent with their first child and 50 percent at age 45.
Use incentives to motivate heirs
Unfortunately, heirs can rely too heavily on their inheritance, or even manipulate life goals by marrying and having children before they are ready. With incentives, heirs are driven to succeed in order to access their inheritance. One option to consider is giving them a yearly amount equivalent to their earnings from the previous year.
The options chosen vary depending on the child or children. Speak with an estate planning attorney to make an informed decision about what works best for you and them.
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