It is not uncommon for individuals and families to have many questions when they meet with us for the first time to craft their estate planning strategy. At the top of their to-do list is to clearly and understandably express their final wishes, but they are also eager to learn what protections can be put in place to ensure their assets are passed to the right beneficiaries in the right way.

A natural assumption is that there is only one way to pass assets to beneficiaries: Draft a Will and proceed with an outright distribution. In reality, estate planning is more versatile than that. There are four options to consider—each with its own benefits and considerations. 

Understanding these options ensures your wishes are carried out and that your loved ones and assets are protected. 

Passing Assets to Beneficiaries: 4 Common Methods

1. Outright distribution— As previously mentioned, many people choose to have their assets distributed “outright” to beneficiaries upon their passing. For instance, a parent may leave their only child $500,000 to use at their discretion. People like this option because it is simple and convenient. There are no restrictions, rules, or additional costs, and the passing of these and other assets to one or several beneficiaries is practically instantaneous (pending probate for wills, of course). That said, outright distribution does not protect the assets or the beneficiaries. With no rules or limitations in place, the son could mishandle the inheritance in the blink of an eye. Should he ever be sued, have creditor problems, or go through a divorce, there is nothing in place to protect those funds.
2. Distributing the bequest over time — Rather than give a beneficiary complete control over the inherited assets (money, property, etc.), another option is to put the assets into a Trust that pays the beneficiary over time. So, in the example above, the parent could set restrictions that state their son gets $100,000 when he turns 21, another $225,000 on his 30th birthday, and the remainder five years later. The son still gets the money, but the smaller payouts over time ease him into his new financial responsibilities while offering limited protections for the money that has not been distributed yet. This is because assets held in the Trust are considered separate and typically cannot fall victim to predators, divorce, and lawsuits. That said, it is not impossible for creditors to gain access. The money is also not protected against future estate taxes, and once it is released from the Trust, it is officially unprotected. 
3. Pass assets to beneficiaries through a Heritage Trust — Imagine you have a son who is now grown and married with two beautiful children. You naturally decide to leave everything to him, but if something were to ever happen to him, or he would get divorced, how could you ensure everything would be passed on to your grandchildren? Without a Heritage Trust, you cannot be so sure. Theoretically, your son could leave everything to his wife, and if she were ever to remarry, that could open the door to money possibly ending up with someone else entirely. A Heritage Trust provides bloodline protection and protection from estate taxes, creditors, lawsuits, divorce, and loss of government benefits for beneficiaries. 
4. Multi-generational Trusts — These types of Trusts offer everything a Heritage Trust has, but it is a standalone Trust that pays only the income out of the Trust. The rest of the money in the Trust can be placed in growth-oriented assets. As a result, there is an opportunity to keep building wealth through several generations and leave a lasting legacy for which you and your family can be proud. Multi-generational Trusts are a wonderful tool, but they are not for everyone. Careful planning ensures this estate planning vehicle continues to grow across generations.  

Leigh Hilton PLLC Is Your Local Estate Planning Expert

When you have decided to discuss your estate planning needs for the first time, it is natural to wonder where you should start and how you can ensure your assets are passed to beneficiaries in the most appropriate way possible. The easy answer is to contact an estate planning attorney. After all, protecting everyone you love and everything you own requires proper guidance from someone who can help you make informed decisions and tailor a plan that covers you and your family’s needs from A to Z.

Call Leigh Hilton PLLC in Denton, and we will work with you to determine the best strategy for your unique situation. Proper planning of an estate helps ensure your wishes are honored. We always want to be your first call for any estate planning need. 

We look forward to serving you.

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