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Planning for one’s death is not usually a pleasant process. However, if you’re intending to leave an inheritance to any beneficiaries after you’re gone, it’s important to create an estate plan with their best interests in mind. There are different methods of leaving your assets to your loved ones, and you should have a clear understanding of the relative advantages of each.

Today we examine the three main methods of leaving assets for adult beneficiaries:

Lump sum

Upon your passing, all of your assets designated for a particular beneficiary go to that beneficiary in one fell swoop. While this is the most common method of distributing inheritance, it has its drawbacks. If your beneficiary is young at the time of receiving the inheritance, they may not have the maturity to manage a large sum of money, and they may spend it quickly. In addition, a lump sum inheritance is vulnerable to other life scenarios your beneficiary may encounter. For instance, the inheritance could be lost in a divorce or lawsuit. Furthermore, a lump sum inheritance can negatively impact a beneficiary’s tax liability.

Trust with staggered distribution

Another option is to set up a trust under which your beneficiary receives inheritance in stages—over a period of years. This method enables you to support your beneficiary over the long term. As with a lump sum distribution, however, inheritance provided in this method may not be protected in the event of a lawsuit or divorce.

Discretionary lifetime trust

A third option is to set up a discretionary lifetime trust. This type of trust works in a similar manner to the above-mentioned trust. However, outside life circumstances have no bearing on the money your beneficiary receives.

There is no one-size-fits-all estate plan that’s right for everyone. It’s important to consult with an experienced estate planning attorney to understand the particulars of your situation and determine an inheritance distribution method that suits your needs.

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Gottschlich & Portune, LLP
201 East Sixth Street
Dayton, OH 45402

Phone: 937-802-2397
Phone: 937-802-2397
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