You have a lot of potential tools that you can use when doing estate planning. If you don’t want to leave assets directly to your heirs, for instance, you could consider setting up a trust.
Even if you do this, you still have a lot of different choices to make. Some people have the trust based on what the money can be used for. Others have it based on incentives that are built into it. But one of the most common ways to do this is to base it on age.
For instance, perhaps you have an heir who is 17 years old. You don’t want them to get all of the money while they’re still a minor, so you set it up, so they get half of the trust when they turn 18. But you could also set it up so that they get another quarter at 25 and a final quarter at 30.
Why would you want to do this?
The first reason to do this is simple: You’re attempting not to leave life-changing money to a minor. Perhaps you’re worried that they’ll spend it in frivolous ways or that it will take away their motivation to go to school and work.
But you may still have those concerns even with someone who is 18. This is why people often pick later ages – like 30 – to pay out the rest of the trust. They’re hoping that an heir at this stage in life will make more mature decisions, such as using the money to invest in a business or buy a family home.
No matter why you want to use a trust or what you hope to accomplish, the key lies in understanding the options you have and all of the legal steps needed to set things up properly.