Trust Distribution Examples

Health, Education, Maintenance, and Support

This option allows the trustee to release funds to pay for the beneficiary’s specific needs as they pertain to health, education, maintenance, and support.

Often the Trust agreement has language that suggests or requires the Trustee to first take into account any resources available to the beneficiary. But after those resources have been taken into account, the Trust agreement permits them to release funds to cover a need that fits within this category. A health expense might be something not covered by health insurance, health insurance premiums, or even vitamins and supplements. Education could include tuition for college or private school, books or lab fees, or extracurricular classes— such as music lessons or drivers education. Maintenance provisions would include anything required to maintain the lifestyle the beneficiary had when the Trust maker was living. And support could include anything the beneficiary needs to live.

Almost every Trust includes language instructing the trustee to provide for the beneficiaries’ health, education, maintain e and support. It can also provide specific limitations, such as tuition for in-state schools rather than Ivey League, or provide for the purchase a reasonable car such as a Camry, not a Porsche.

Percentages Over Time

A common distribution scheme is to break down the beneficiary’s inheritance over time. This means that a trust maker would indicate a certain percentage of the inheritance to be released at specific ages.

A common breakdown of this type of distribution is ⅓ of the inheritance at age 25, the next third (or ½ of the remainder) at age 30, and the last third (or 100% of the remainder) at age 35.

This allows inheritances to be released over time and allows the beneficiaries to mature and grow in their management of finances over time. Wealth can be a burden to the young who haven’t grown into maturity regarding finances. Many trust makers opt for this option to allow their beneficiaries to grow and mature as they inherit funds.

Landmarks

Another option is to instruct the trustee to distribute the funds when certain landmarks are achieved. Many people choose to give a certain percentage when the beneficiary graduates college or gets married. This option allows the trust maker to incentivize things that matter to them.

This can be a great way to promote certain behaviors or lifestyles. But so keep in mind that for some beneficiaries this could be viewed as a punishment. Some successful entrepreneurs never graduate college but are wildly successful. If there is only a provision for college graduates within the Trust you may be limiting the potential of a wonderful beneficiary because they took a road less traveled.

Allowances

Another option is to provide for a monthly or yearly allowance. Similar to the percentages over time, you can specify how much each beneficiary can receive each month or year and even provide rules that have to be followed to obtain this distribution.

This is the type of distribution we often think of when a “trust fund baby” is portrayed on television. A young person having to abide by her deceased grandfather’s rules or she’ll be cut off.

Obviously, you, as the trust maker, get to determine the rules. They can be strict or simple.

Which Is Best?

So which distribution option is best for you? Your estate isn’t cookie cutter, so your distribution options don’t have to be either! In most cases, it’s best to mix and match the options above to meet your needs and your loved ones’ needs. The most important part is making sure your wishes are clearly defined so your trustee can follow the instructions with ease.

We are here to help you draft the Trust and Trust distribution guidelines that work best for your estate and loved ones. We are here to bring peace of mind through great estate planning.

Call us at (404) 736-6066 or visit our website to schedule a consultation.