One of the estate planning mistakes that many New Jersey residents make is not using a trust to hold assets for their adult children. Trusts can be particularly helpful if an adult child has unhealthy spending habits.
Assets that are left outright to adult children can be squandered if left in the hands of adults who do not have the financial maturity needed to handle money properly. The adult children may see the wisdom of having a financial advisor help them manage the wealth they receive. However, there's no guarantee that the beneficiaries will make wise choices when choosing someone. To ensure that the wealth will continue to grow and last for years to come, it may be prudent to have the financial assets properly managed through a trust.
Estate holders should assess each of their adult children for their ability to manage future assets. After an honest assessment, it's easier to make an informed decision regarding who could handle receiving an outright inheritance.
For parents who believe it wise to leave the assets for their adult children in a trust, there are rules they can create to control how the assets are distributed. Annual distributions from the trust can be restricted to just a percentage of the trust's value or to investment income. The trustee can also be given the authority to determine how the distributions should occur.
An estate planning attorney may advise clients about how trusts can help protect financial assets for future generations. Clients may be advised of the most appropriate type of trusts to use for their financial goals and the needs of their beneficiaries.