While people think about their loved ones receiving their assets—and being financially secure—after their passing, they often do not consider how the loved ones will receive these funds. It may seem simplistic; however, there are a few different ways for loved ones to receive their inheritance. These different methods will all impact how quickly beneficiaries—the individuals who will get the assets after the person’s passing—will receive their inheritance. Below are explanations for the various types of asset distributions utilized by Houston trustees at the end of the estate planning process.
3 Ways To Distribute Assets to Beneficiaries
By creating a trust, a three-party relationship is formed between the grantor—the individual creating the trust, the trustee—the individual who will oversee the trust’s management and ultimately disburse the trust funds—and the beneficiaries. All of these parties play a different role in the estate planning process.
There are three main ways that a trustee distributes assets to beneficiaries. Ultimately, the grantor gets to decide which distribution method is utilized by the trustee. These distribution methods are called outright, staggered, and discretionary distributions.
- Outright distributions are the simplest process. After the grantor’s death—and once an estate’s debts and taxes are paid—the assets are given to the beneficiaries without any restrictions in a single lump sum. These asset distributions tend to have very nominal fees.
- Staggered distributions mean that the beneficiaries receive the assets over time, rather than in a lump sum. The beneficiaries get the funds based on the rules set by the grantor in the trust, like every month or after certain events—such as a person turning 18 years old or after they get married. Because of this, grantors often pick this distribution method when their designated beneficiaries are minors. However, this type of distribution is more expensive for the grantor because there is a cost to administering the trust assets over a longer period of time.
- The third distribution method is discretionary distribution. This leaves the distribution dates and amounts up to the trustee to decide when—and how much—the beneficiaries will receive. Discretionary distributions are often chosen if the grantor fears the beneficiary would have trouble managing their money. Like the staggered distribution method, discretionary distributions often have higher administration costs because it could take years for the assets to be distributed. For grantors who pick this method, they should take extra consideration when selecting a trustee, since that individual will be making the decisions on behalf of beneficiaries and the assets.
It can often be difficult and overwhelming for grantors to choose which distribution method is the right choice for them and their beneficiaries. Because of this, individuals creating a trust should contact an experienced estate planning attorney who can go over all of their options and decide which method is best for them.
Contact a Houston Estate Planning Lawyer
If you or a loved one is interested in creating a trust to ensure loved ones’ financial security after your passing, contact the Houston estate planning attorneys at McCulloch & Miller, PLLC. Our attorneys have decades of experience drafting trusts for Texans. We will work on drafting a trust that fits you and your situation perfectly. Or, if you already have a trust in place, our knowledgeable attorneys can answer any of the questions you have and update your estate plan, if necessary. To schedule a free consultation, give us a call today at 713-333-8900.