Asset distribution is a topic that many of our clients have questions about. Can they put stipulations on distributions, like an adult child must finish college first? Or reach a certain age before receiving the funds? What are the options to distribute the inheritance slowly over time instead of all at once?
Once someone knows where they want their assets to go, it’s time to get into the details of how and when the assets get distributed. The chosen method can be just as important as deciding who receives the assets, and the right structure can provide long-term protection for those assets.
Outright gifts versus trust protection
Assets may be given outright directly to a beneficiary or placed in a trust. Even with responsible adult beneficiaries, some families choose a trust for added safeguards, as it can shield assets from the beneficiary’s outside creditors and, in many cases, from division in a divorce. However, an irrevocable trust generally requires its own tax return, which doesn’t always make sense for smaller estates. That’s where working with an experienced estate planning attorney can help with understanding the options and best approach for each situation.
Flexible options for trust distribution
If using a trust for asset distribution, there are multiple options to dictate how those distributions occur over time. Some options include:
Common trusts for minors where a single trust covers all expenses for all of the minor children with the remaining funds divided when the trust ends, which is typically when the oldest child reaches a certain age.
✅ Age-based milestones that specify at what age beneficiaries receive all or a portion of trust assets.
✅ Withdrawal rights that allow a portion of the trust to be withdrawn after a specified number of years.
✅ Discretionary distributions that allow the trustee to pay for the beneficiary’s needs, such as health-related expenses or educational expenses such as tuition.
✅ Unitrust distributions that allow for distributing a fixed percentage of the trust, calculated annually, and distributed periodically (e.g. monthly or quarterly) to help preserve overall trust value.
Some estate plans will use a combination of these tools to distribute assets over time.
Adding special provisions and incentives.
If using a trust to control distribution of assets, the trust terms may include specific provisions or incentives that impact how assets are distributed.
Provisions may include:
🟢 Requiring that the beneficiary look to other sources before requesting a distribution.
🟢 Addressing situations involving substance abuse or other concerns.
🟢 Offering incentives, such as additional distributions for completing a degree by a certain age.
When including incentives, it’s important to address exceptions so beneficiaries are not penalized for circumstances beyond their control. For example, a trust might dictate that the individual completes a college degree by age 25 to receive 50% of the trust. But if they are seriously injured in a car accident at age 24 and can’t complete their final year of school on time, an exception could allow them to still receive those funds later.
Finding the right balance.
Asset distribution planning goes beyond transferring wealth — it’s about preserving a legacy, protecting beneficiaries, and supporting wise use of resources. Because each family’s goals and circumstances are unique, there’s no one-size-fits-all plan for how and when asset distributions should occur. Working with a qualified, experienced estate planning attorney can help with understanding your options and creating a plan that best suits your individual goals.
We’re here to help with asset protection questions.
Wright Law Firm provides estate planning services for individuals and families. Have questions about asset distribution? Reach out to our team, and we can guide you or a friend, family, or client through the process of creating an estate plan and deciding the best strategy for asset distribution.
