You do not have to give a financially inexperienced or impulsive beneficiary their entire inheritance outright. A continuing trust can hold the funds and authorize a trustee to make distributions for the beneficiary's needs, helping the inheritance provide support over time.
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How Does a Continuing Trust Work?
Instead of transferring an inheritance directly into the beneficiary's name, your living trust can direct that the share remain in a separate continuing trust. The trustee manages the trust property according to written instructions and can pay expenses or make distributions as permitted.
Can a Trustee Pay for Health, Education, and Living Expenses?
Yes, if the terms allow it. You can authorize the trustee to consider health, education, maintenance, support, and other defined needs. Depending on the structure, the trustee may pay service providers directly or distribute funds to the beneficiary.
Can an Inheritance Be Distributed in Stages?
Potentially. Some trusts authorize distributions at certain ages, on a schedule, or when a trustee determines specified conditions have been met. Others permit continuing discretionary distributions without requiring the entire balance to be handed over. Each approach has trade-offs involving control, flexibility, costs, and protection.
Who Should Manage the Inheritance?
Select a trustee with financial judgment, reliability, and the ability to act fairly. Consider whether a family member, trusted individual, or professional is best suited to the task. Learn more about the role of a trustee.
Is a Continuing Trust Better Than Giving the Inheritance Outright?
That depends on the beneficiary and your goals. An outright gift offers simplicity and independence, while a continuing trust may provide oversight and reduce the risk of rapid spending. The firm's discussion of outright inheritances compared with trusts can help you consider the differences. If addiction, disability, or eligibility for public benefits is involved, additional special-purpose planning may be needed.
For help building practical protections into a California living trust, contact Kavesh, Minor & Otis or attend a free estate planning seminar.
