Distributing Your Estate

Estate planning also involves creating a plan to manage and/or distribute your estate when you die. Failing to legally lay out your wishes results in the following:

• You relinquish control to the state in which your assets reside, allowing that state to determine who inherits from you, how much they inherit, and when they inherit
• Your estate (in California, if valued at more than $162,500) will have to go through a formal probate before it can be distributed, which will eat up your beneficiaries’ time and money
• Your beneficiaries may have to pay a hefty estate tax bill upon inheriting from you

A well-crafted estate plan, on the other hand, empowers you to determine who inherits from you, how much they inherit, and when they inherit. This is particularly useful if you have minor children or young adults as beneficiaries.

In the absence of estate planning, a minor child beneficiary will inherit their full share upon turning 18. Sometimes this is not the best approach – as you can imagine, receiving a large inheritance at a young age can actually harm a child by perhaps canceling plans for continuing education or encouraging unwise spending practices.

That’s why it’s often important to set young adults up for success by spreading out their inheritance over a number of distributions. One approach includes: one-third upon earning a bachelor’s degree or reaching the age of 25, one-third upon reaching the age of 30, and the final third upon reaching the age of 35.

For many young adults, wisdom and maturity develop with each successive distribution, thereby inspiring confidence in handling money and setting them on a path toward a lifetime of successfully handling finances.

Another approach is to employ strategic Asset Protection Planning for your children, through the creation and funding of Lifetime Protection Trusts. These trusts do exactly what it sounds like – they protect your beneficiaries from creditors, predators and divorcing spouses.