When many people create trusts, they are based on a specific type of use. For example, an educational trust can pay for someone’s college tuition. A special needs trust can help support an heir that has special needs without disqualifying them from the government benefits that are so necessary for their life.
But you don’t necessarily have to latch onto a specific use when deciding how a trust should be set up. For example, some people will simply refer to the age at which the individual is allowed to inherit the money.
Why would this be done?
This will often be done when an heir is either a minor or simply young enough that the person creating the trust is concerned about leaving them their entire inheritance at once. An 18-year-old college student can technically inherit $1 million, for example, but their parents may not necessarily want to give them that type of financial gift at that age.
As such, they will set the trust up to distribute portions of the inheritance at different deadlines. Maybe the heir will get 10% of it right away, then they will get another 40% when they turn 25 years old and they will get the final 50% when they turn 40 years old. This is just an example, and percentages and ages can certainly vary depending on your specific situation. But you can see how delaying the distribution of the money can help your heir use it for valuable issues at each stage in life – like buying a house for their family.
If you do want to set up a trust, it’s critical that you get the details right, so make sure you know what legal steps to take.