Anecdotes of heirs misusing or completely blowing their inheritance are sadly not that difficult to find, and the implications of these stories can be especially troubling for people in California who are considering what to leave behind. However, this does not always have to be the case. By creating a trust for an inheritance, individuals can be assured that a named trustee will ensure the proper handling of the assets.
Trusts have long been utilized in this manner by wealthier families who want to make sure that younger generations do not squander family money. Families of more moderate means tend to ignore trusts, viewing them as unnecessary. No matter a person's net worth or value of their estate, a trust can still provide considerable protection to any asset or inheritance passed on to a child, which can be of value if there are any concerns about how that individual will use or spend it.
Relatively easy to set up, trusts work by a grantor titling assets in the name of the trust. From there a beneficiary who is to receive the trust is named, as is a trustee who is responsible for overseeing the distribution and handling of the trust. When the grantor dies, the trustee can handle the trust according to the included instructions while simultaneously bypassing the probate process altogether. There are certain tax benefits to creating a trust that are also to be considered.
By requiring that the trustee only distribute assets or the inheritance to the beneficiary upon the completion of certain milestones -- such as having a child of his or her own or reaching a certain age -- grantors can exercise an enormous amount of control over the trust, even post-death. Even life insurance policies, an asset that even less wealthy families often have, can be placed in a trust. From tax benefits to ensuring more control over an inheritance, adding a trust to an already established estate plan can be a beneficial move for most people in California.
Source: nerdwallet.com, "Don't Trust Your Heirs? Create a Trust", Rachel Podnos, Dec. 16, 2015