There are many different types of trusts that exist. A discretionary one is quite common. It’s essentially an asset protection tool that allows for a grantor to appoint a trustee to make distributions. This type of trust is also different from other types of them in that beneficiaries can’t demand withdrawals from or control it. There’s no predetermined time frame for transferring the trust to beneficiaries either. These are only some of the pros and cons associated with discretionary lifetime trusts.
You may find it appropriate to set up a discretionary lifetime trust if you have young children. One of the primary reasons that you may want to do this is because minors aren’t legally able to manage accounts or property themselves. Your kids’ inheritances would have to be managed by a court-appointed guardian if you were to die without an estate plan in place. You don’t have to wonder who’s going to be assigned to oversee distributions if you set up this type of trust.
One desirable aspect of discretionary lifetime trusts is that you’re able to schedule a termination date for the trust. Most parents set this to happen on their child’s birthday. This date doesn’t necessarily have to be when your son or daughter first reaches an age of majority though. You may elect to set it for several years after that when your child is hopefully more fiscally responsible instead.
You should know that one drawback to setting up a discretionary lifetime trust is that it can be reached by your ex or creditors if you divorce. Any funds contained in the trust can then be used in calculating your New Jersey spousal or child support obligations. You may want to include a spendthrift clause in your irrevocable trust document to protect against this as much as possible.
Trusts are excellent tools for protecting your money and property for you and your loved ones both while you’re alive and once you pass away. Your attorney will want to know about your goals for your Bridgewater family’s future before recommending that you set up any particular type of trust.