Sometimes, leaving someone an inheritance without any guidance or restrictions is not always a good idea. For example, if the person can be expected to quickly waste whatever they are given on frivolous things, then you might want to find a better way to handle their inheritance in your estate plan.
A lifetime discretionary trust is one option to consider.
In these trusts, the trustee does not have to distribute assets in any specific way but can choose to do so whenever appropriate. Recently, Wealth Management wrote about their benefits in "The Perils of Outright Distributions and Gifts."
The benefits include:
If the trust is properly structured, the assets are sheltered from any creditors of the beneficiary.
If the beneficiary gets divorced, trust assets can be protected from the ex-spouse.
If the beneficiary becomes incapacitated, it will not hurt the trust.
By keeping the assets in a trust, it is more likely that there will still be something left for future generations even if the initial beneficiary is a spendthrift.
Assets left in the trust will not be subject to unnecessary estate taxes when the beneficiary passes away, if the trust has been structured properly.
The beneficiary will not be able to sell off trust assets for fast cash at bad market times.
Contact a qualified estate planning attorney to help evaluate whether a lifetime discretionary trust makes sense for your unique circumstances.
Reference: Wealth Management (May 31, 2016) "The Perils of Outright Distributions and Gifts."