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Special Beneficiary Provisions Containing Trusts

June 5, 2009

This edition of the Koldin Report E-Newsletter reviews special beneficiary provisions containing Trusts to meet the particular needs of your heirs.

There are many situations where you may want to provide for your family after your death with their inheritance held in a Trust. These special Trusts are part of the beneficiary clause of your Trust or Will. The following are some examples of commonly used special beneficiary Trusts:

Asset management trust for minors:

You can leave a bequest in a Trust to be used to pay for the support and education of your beneficiary (example: grandchild). Once the grandchild reaches a designated age such as 25 years old, he/she could receive the balance outright. Under the terms of the Trust, the Trustee can be granted the authority to provide for your beneficiary’s health, education, welfare and comfort.

Unlike an account created under the Uniform Transfers to Minors Act (UTMA Account) which must be turned over to the child at age 21, with a Trust, you can set any age you wish for when the funds must be turned over to the child. Also, with a UTMA account, you can only appoint one custodian to manage the funds. With a Trust, you can appoint multiple Trustees and Successor Trustees. Also, with a Trust, you can restrict when funds may be spent on the child. For example, you could limit distributions to education expenses.

Support trust for a family member:

You can leave a bequest in a Trust to be used to support and pay expenses of a family member such as an adult child. This is often used when a child does not handle money well and would squander his/her inheritance. Such a Trust would have the Trustee be the caretaker of the funds and use discretion as to when and how the funds should be spent. You can designate a certain age when the funds must be turned over outright to your child, or you can direct that the Trust continue for his/her lifetime. You can also designate who you want to inherit the remaining balance of the Trust after your child dies.

Income for life trust:

You can leave assets in a Trust where the beneficiary would receive all of the income earned on Trust assets, but the principal would remain in the Trust. Upon the death of the beneficiary, the balance would then go to whomever you have designated. This type of Trust is often used in a second marriage situation where you want to provide for your spouse, but on his/her death, the balance would then go back to your own children.

Supplemental needs trust for a family member with disabilities :

If you have a family member with disabilities who is receiving government benefits, you can leave your assets in a Trust for him/her which would be used to supplement the government benefits but not replace those benefits. Such a Trust, if written properly, would not be deemed to be an asset of the person with disabilities and therefore would not cause him/her to lose government benefits.

The Koldin Law Center, P.C. is available to review your family situation and help you decide if one of these special beneficiary Trusts would be advisable for you.

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