Most people are content to leave their property to their survivors outright, without trying to control what they do with it. However, there are times, especially for people with very large estates, when it can make sense to impose controls on what people can do with property you leave them. We discuss the most common situations here.
Many people who leave property to children or young adults want to delay the age at which the beneficiaries will receive the property.
You can set up this kind of property management in your will.
Some people enter into second, third or fourth marriages unconcerned about estate planning. If each spouse has enough separate property to live comfortably, there may be no need to combine assets and create the problems that can arise as a result. In such cases, the simplest solution is often to make a prenuptial agreement making it clear that separate property stays separate; then each can make an independent estate plan for that property.
But in many second or subsequent marriages, one or both spouses may feel conflicted about estate planning. On one hand, a surviving spouse may need the income from, or the use of, the other spouse's property to live comfortably. On the other hand, either spouse may want to provide an inheritance for children from a former marriage. This situation becomes even more complicated when a current spouse and children from a former marriage don't get along well.
One possible solution is to set up a trust—often called a "marital property control trust"—to try to balance the interests and needs of all concerned. Essentially, this type of trust gives the surviving spouse some use of or income from the trust property, then leaves the property outright to children from a prior marriage when the surviving spouse dies.
A marital property control trust is different from an AB trust (discussed above) intended only to reduce estate taxes. With an AB trust, the surviving spouse is usually granted the maximum rights allowed under IRS rules to use trust property. In contrast, a marital property control trust is designed to protect the trust principal, so that most of it still exists when the surviving spouse dies.
Trusts like these are tricky, and you'll need an experienced lawyer to help you set one up.
A person with a physical or mental disability may not be able to handle property, no matter what age. And gifts left directly to a beneficiary with special needs will jeopardize that person's access to public benefits. The solution is often to establish a trust—called a "special needs trust"—to manage the property while preserving the beneficiary's eligibility for government benefits. You can learn more about this kind of trust by reading Special Needs Trusts: Protect Your Child's Financial Future, by Kevin Urbatsch and Jessica Farinas Jones (Nolo). An electronic version of this book is available in the Books section of your WillMaker software.
If you want to leave a substantial amount of property to someone who is known to be irresponsible with money, a good estate planning lawyer can help you establish what's known as a "spendthrift trust." In it, you can empower a trusted person or institution to dole out the money a little at a time.
For any number of reasons, you may want the exact division of your estate to be determined after your death, instead of directing the division in a will or trust.
The usual way to accomplish this is to create what is called a "sprinkling trust." Usually, the trust creator names the beneficiaries of the trust during life, but does not specify what share each is to receive. That is done by the trustee, after the creator dies, under whatever terms the trust dictates. Again, you'll need an experienced lawyer to set up this kind of trust.