The simplest way to leave an inheritance for an individual is to name them as a beneficiary in a will. Some people have a legally-protected right to inherit when a close family member dies without an estate plan. Spouses, children and even parents can inherit from the estate of someone who dies without a will.
Those who want more control over their legacies may decide to draft estate plans explaining their wishes and allocating specific assets to their chosen beneficiaries. Generally speaking, testators establishing their estate plans have the option of naming people or even charitable causes as their beneficiaries.
However, there are some limitations to that authority. Not everyone is in a position to directly inherit resources from an estate. Testators may need to consider creating trusts if they want to leave property for any of the three beneficiaries mentioned below.
Minor children
Even the most mature teenager typically does not have the right to make all of their own financial decisions. They are still under the legal protection of their parents and therefore subject to their decision-making authority. Any resources that a child inherits are usually under the control of their parent or guardian. Particularly in scenarios where divorced parents want to leave resources for their minor children, creating a trust to prevent the other parent from gaining control over those resources might be a smart decision.
Adults with special needs
Not everyone who is legally an adult has the capacity to manage their own affairs. Adults with developmental disabilities and other disabling medical conditions may be subject to guardianship or conservatorship. The person tasked with their legal support and care may control any assets that they inherit. Additionally, a lump-sum inheritance could interfere with their eligibility for certain state benefits. Establishing a trust is often a smart step when a beneficiary has special needs. Trusts can reduce the likelihood of financial abuse and protect a vulnerable person’s access to state benefits.
Companion animals
Pets can play an important role in people’s lives. Animals provide companionship and a sense of purpose. It is only natural for those who love their animals to want to ensure their comfort and safety. Unfortunately, animals do not have property ownership rights. Leaving a direct inheritance to an animal could result in will contests. There could also be reason to worry about people abusing or even euthanizing the companion animal after gaining access to its inheritance. The establishment of a pet trust allows an animal’s owner to provide for its needs. Choosing a trustee other than the person who may care for the animals in the future helps provide oversight and protection for a beloved companion animal.
Realizing that some beneficiaries cannot legally control inherited property or may be vulnerable because of it can help people establish better estate plans. Individuals with vulnerable loved ones may need to expand their estate plans to include trusts.