Entering adulthood comes with the crossing of a handful of milestones that traditionally signify the beginning of one’s new life: getting married, purchasing a first home, even starting a business. For the parent, there is no way to predict the outcome of what a child may do with his or her future—or when. There are, however, certain ways for you to safeguard the inheritance that is awarded and make sure it is being delivered at the right place, at the right time.
Many parents choose to formulate an inheritance that “triggers” upon the start or completion of a certain life event. With buying a home, for example, a trust may become active when the mortgage papers are signed or once their wedding day has passed. The inheritance payments may also be formally designated to apply towards certain expenses such as mortgage costs or rent for a new business storefront.
For parents who want to ensure that their child remains motivated and independent regardless of a potential financial cash flow via an inheritance, an incentive trust may be a safe option. Incentive trusts allow parents to decide when a trust is activated based on a child’s action. For example, the trust can be set up to apply only if a child puts a certain percentage of a down payment on their home or if they were start to manage the family business. If the child does not complete the “trigger,” the financial incentive is not rewarded or is downgraded (depending on terms of the trust).
Additional Costs to Consider
According to CNN Money, the average cost of a wedding in 2014 was $30,000—a cost that does not even include rings, licenses, or a honeymoon. Similarly, first homes come with large costs—not only the cost of the down payment, but major appliances, improvements, taxes, and upkeep. Parents looking to ensure that their children are covered must take into consideration all of the costs that can go into a wedding or the purchase of a first home when they consider what to leave a child.
Playing a Role in Your Child’s Future
Deciding how much of an impact your inheritance has on your child’s milestones can be a difficult one. With much to consider from marriage to starting a business, there will always be additional costs to factor in. However, knowing how you want your child to use your inheritance can help your family set aside a trust that rewards and celebrates life’s great moments.
About Caldwell Trust Company
Caldwell Trust Company is an independent trust company with offices in Venice and Sarasota, Florida. Established in 1993, the firm currently manages over $800 million in assets for clients throughout the United States. The company offers a full range of fiduciary services to individuals, including services as trustee, custodian, investment adviser, financial manager and personal representative. Additionally, Caldwell manages 401(k) and 403(b) qualified retirement plans for employers.