We're in the middle of a series discussing the options for setting an age which your minor children must reach before receiving their full inheritance. Today, I'd like to talk about special distributions and indexing them for inflation.
One way to protect your children's inheritance without making them feel like you don't trust them is to allow the custodian (usually a trustee) to make a one-time special distribution. Such a distribution could be limited to a specific purpose, like a down payment on a house or starting a business. You can restrict when such a distribution is available by setting an age or event that must be reached before the distribution is made. Typically, each child must request the distribution, but you can either give the trustee discretion whether to make the distribution or make such a distribution mandatory. But, perhaps the most common restriction is setting a maximum dollar amount on that distribution.
What many people forget to think about, though, is the passage of time between the creation of their estate plan and its implementation. You've probably heard the phrase "the time value of money." That phrase describes the way money changes value over time. An example: $10,000 will buy the same thing today as $13,756 will buy in 2021. Setting a maximum dollar amount for early distribution is a good idea, then, but inflation might make that $100,000 maximum you chose insufficient for the purchase of a house.
What's the solution? It's actually a pretty easy fix: just instruct the trustee to adjust the number for inflation over the period of time between your will's execution and your death. By adjusting for inflation, you ensure that your intentions are followed to the greatest extent possible.
Ask your estate planner about indexing special distributions for inflation. Your heirs will thank you (posthumously!).
------------------
Lawyer Joke of the Day
"How can I ever thank you?" gushed a woman to Clarence Darrow, after he had solved her legal troubles.
"My dear woman," Darrow replied, "ever since the Phoenicians invented money there has been only one answer to that question."
No comments:
Post a Comment