When people explore estate planning, many discuss protecting assets from long-term care costs, creditors, lawsuits, and divorces. People understandably want to guard their nest egg for their beneficiaries. A less commonly discussed (but sometimes equally important) issue is protecting assets from the beneficiaries. No one wants to see their heirs squander their inheritance or lose their work ethic and motivation as a result of coming into money. Trusts present a myriad of solutions that can make an inheritance last a lifetime—or at least a very long time—for children and other beneficiaries.

                The most common issue is the age of beneficiaries. The age of 18 may be old enough to legally inherit money, but it’s a risky bet to leave an estate to a teenager with no strings attached. Some people set an age of 25 for receipt of inheritances, but given that many young people are not fully mature in their 20’s, it may be best to consider an age of 30 or higher. In the interim, a trustee (usually a family member, close friend, or attorney) can dole out money to young people according to a standard as broad or narrow as you would like. HEMS (health, education, maintenance, and support) is a broad standard that provides wide latitude for a trustee to provide funds for college tuition, travel, etc. Other trusts can be more narrowly tailored to state specific instances when beneficiaries are and are not entitled to receive funds. When the beneficiaries reach the age designated by the trust, they will receive their inheritance outright.

                Youth is not the only reason why beneficiaries may be ill-equipped to receive an inheritance. Sometimes there is no age where they will reach the requisite level of responsibility to handle the assets. Some beneficiaries struggle with addiction, gambling/spending problems, or a general lack of fiscal understanding and responsibility. Trusts can be essential tools for these beneficiaries because trusts provide investments that can deliver income for life, or homes where the beneficiaries can reside without giving these beneficiaries the reins to liquidate assets and drain principal. Responsible trustees can use trust principal to support the beneficiaries, and pay rent, property taxes, insurance, and other living expenses, while otherwise keeping the assets invested and safe.

                Generally, if you can dream it, you can do it when it comes to holding money in trust for beneficiaries—so long as it doesn’t violate the law or the rights of the beneficiaries. New York has a rule against perpetuities, so you can only put restrictions on generations that exist, not distant future heirs. But there are still plenty of ways to make sure that your legacy lasts long after you’ve passed on. You can give your beneficiaries as much or as little control over their inheritance as may be appropriate. Consider consulting an attorney to understand all of the many options that trusts present for your family.  

Michael Wagner, Esq., senior counsel at Jacobowitz and Gubits, LLP, jacobowitz.com

For over 50 years, Jacobowitz and Gubits, LLP has provided sophisticated legal representation to individuals, businesses, non-profits, and municipalities through the Hudson Valley. With highly skilled attorneys practicing over 30 areas of law, there’s no reason to go elsewhere. As a full-service law firm with over 20 attorneys and more than 20 staff members, J&G delivers optimal legal solutions utilizing a team approach. United by the desire to exceed our clients’ expectations, the firm has established a reputation of excellence which has made us one of the longest-standing full service law firms in the region. Our commitment to our clients extends to the community in which we all live. We commit our energies, talents, and personal time to local charitable causes, serve on the boards of and represent local not-for-profit organizations, and provide educational speakers for local civic groups.