The simplest way to leave resources for specific parties is to name them as beneficiaries in a will. Many people establishing estate plans only draft wills. They can designate beneficiaries and specify what assets those beneficiaries should inherit.
They can name a guardian to care for their minor children if they have any. The testator can even name a personal representative to handle estate administration after they die. While wills are very effective, there are limits to what they can do.
Wills generally facilitate the direct transfer of assets to beneficiaries. In some cases, the structure of a trust can be beneficial. There are certain types of beneficiaries who may not be able to directly inherit from the estate. If someone intends to leave assets for beneficiaries who belong to one of the three groups below, then creating a trust may be a smart addition to their will.
1. Minor children
The children or grandchildren of a testator are often the primary beneficiaries of an estate. People want to leave resources for the future generations of their families. Children generally do not directly control their property until they become legal adults.
Until that point, their parents or guardians have control over their resources. Leaving an inheritance directly to minor children may mean that their surviving parent or guardian has control over that inheritance. A trust can help preserve resources until those children become adults.
2. People with special needs
Many people have loved ones with special needs. They might have an adult child who cannot live alone or a sibling for whom they act as a caregiver. People with special needs may struggle to manage an inheritance if they receive one. They can be relatively vulnerable to financial abuse by others.
They could also become ineligible for certain state benefits after receiving a lump-sum inheritance. A trust helps protect people with special needs from financial abuse and the loss of important benefits.
3. Pets
People often treat pets as though they are part of the family, which might include planning for their care when an owner passes. However, animals technically cannot own property outright.
Leaving assets to a pet might result in complications with estate administration or people mistreating the animal later. Leaving resources in a trust to provide for a pet is often a safer option.
Creating and funding a trust as part of a thorough estate plan can give people more control over their legacy. Those with vulnerable beneficiaries may need to establish more structured estate plans.