One of the most quoted phrases from Shakespeare’s plays is the opening line of Hamlet’s soliloquy in Act III in which the prince questions whether it is better, ‘To be or not to be.’  While Hamlet was weighing the pros and cons of life or death, a less weightier but still important question for individuals who are thinking about their estate plan is ‘to trust or not to trust.’ That is, should their estate plan be designed to distribute all of the assets to the children at the parents’ deaths, or should a child’s inheritance continue in trust for the child?

There are some circumstances where stipulating that assets remain in trust following the death of the Trust maker are obvious.  These include families in which the beneficiaries are minors or disabled, for example.  But what about situations where the Trust maker’s children are all healthy adults with no issues?  In these cases, the question of whether a child’s inheritance should continue in trust for him, or be distributed outright to the child at the parents’ deaths depends on a myriad of factors.  These factors include the size of the inheritance, the attitude of the parents, and the age and circumstances of the child.

One of the primary advantages to setting up ongoing trust shares for adult children is creditor protection.  This is something my clients are more and more concerned about these days.  Even if your child seems to be in a good and stable place right now, who knows what the future will bring. Potential creditors include, but are certainly not limited to, a divorcing spouse, credit card debt, bankruptcy, a lawsuit, trouble in the child’s business, a disabling illness or accident, and the child’s poor judgment about people, money management, or both.

Directing that  a child’s share remain in trust for his benefit at your death can protect the child’s inheritance from the reach of his creditors.  There are many options for structuring such trust shares. These range from naming your child as the sole trustee of his share and granting him liberal discretion to make distributions to himself and his family, to requiring that there always be a professional trustee (i.e. bank or lawyer) who has the final say over distributions.

Whether or not structuring your estate plan to include ongoing trust shares for your children after your death is right for you depends entirely on your particular situation and goals.  Talk to your estate planning attorney about how such trusts might benefit your family and stop wondering whether, ‘to trust or not to trust’!

Published September 2014