The typical older trust would provide for the outright distribution of trust property to the remainder beneficiaries of the Trust. For example, a trust for a married couple might provide for all trust property to go to the Surviving Spouse, and then be passed on outright to the couple’s issue or their descendants per stirpes or by right of representation. An estate plan prepared by an individual may have similar distributions outright to that person’s heirs.
This planning approach has the advantage of being simple to understand and simple to implement after death. However, it also completely ignores the very real potential problems of heirs losing their inheritances as a result of:
- Being too young or financially immature
- Having a drug, alcohol, gambling or addiction or abuse problem
- Being in a bad marriage that is financially, emotionally, or physically abusive
- Having pending lawsuits, money judgments, or in bankruptcy
- Being a special needs person, relying on government assistance for shelter, income, custodial medical care, or medical insurance
- Dying later having done little or no estate planning for the inheritance
- Going through a dissolution of marriage without planning for the inheritance
- Working in a high-risk profession or occupation such as law, medicine, accountancy, etc. where lawsuits for malpractice claims could lead to the loss of property, including inherited property
More modern trust planning would likely involve Legacy or Dynasty trust planning, what I call “Castle Trust” planning, using multi-generation skipping trusts to pass inheritances into asset-protected trusts for heirs. These trusts can provide for asset protection for an inheritance, trust oversight through the use of trust protectors or trust advisors and can grant limited or general powers-of-appointment to permit heirs to direct trust property to future beneficiaries.