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Choose the right distribution for a child's inheritance

If you have children who have been left inheritances, it can be difficult to decide when to allow them access to those funds or assets. For the most part, children don't grasp the full value of what they've been given, so you want to wait until they're old enough to understand that they're receiving a large amount of money, a home or another valuable asset.

If the inheritance is in a trust, a trust can determine how the child receives the inheritance. Some are set up to allow for discretionary distributions. This means that the money might be used for special expenditures at the fiduciary's will as long as the beneficiary's need is valid.

Another option is a mandatory distribution. This is fairly common, and it sets an age where a person receives the inheritance. For example, the trust may allow your child to receive half an inheritance at the age of 18 but then only provide the other half once they reach 25. Why tier the distribution? It gives the child time to learn from the first round of mistakes they may make with the initial distribution. The hope is that they won't spend in unwise ways.

Finally, there is a possibility of event-driven inheritance. For example, a grandmother may leave behind a trust set to release funds once the grandchild receives a valid driver's license. Another person may opt to set it up to distribute upon the beneficiary's wedding day.

These are a few ways to work with trusts to create an ideal inheritance scenario for your beneficiaries.

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