With the current Federal estate and gift tax exclusion amount set at $11.4 million per person, many families have been able to shift their planning focus from death taxes to planning for the financial security of their children.
An estate plan that establishes a well-structured trust can provide future protection for children who are either unable to manage large sums of money, suffer from substance abuse, or are unsure of a projected career path. Simple estate plans often result in outright bequests to children that can lead to disastrous results. A properly drafted discretionary trust can replace the wind-fall inheritance that often occurs and replace it with a long-term financial resource that is protected from a child’s creditors – including a future divorce.
A trust allows parents to identify a standard of support for their child and determine what type of distributions should be made. Additionally, parents can set forth their wishes and intentions for the child and permit the Trustee to provide increased financial support if the child obtains certain achievements.