In this blog we will be talking about the advantages and the disadvantages of giving a gift outright versus a gift given in Trust. Generally speaking, a gift given in Trust is the preferred method because of the protection a Trust can provide.
What is an Outright Gift? This is a gift that is given to another with no strings attached so-to-speak. A simple Will that gives a person (a beneficiary) something does so “Outright”. A Will that does not create a Trust (called a Testamentary Trust) cannot control how the gift is used, how long it is to be held, or provide any protection to the beneficiary from predators, bad marriages, creditors, or even from the beneficiary her or himself. The donee (the person that receives a gift) is free to do whatever they like with an outright gift the moment they receive it. Some donors cringe at the thought of one (or more) of their kids getting a large gift at a young age for fear of squandering the gift. The older we get, the older we think our kids should be before they get such a large gift also! Aside from that concern, or even if you don’t have such a concern, there is another reason to use a Trust to distribute a gift. I heard a story once of a responsible donee that received a gift of money from his parents. He put the money in his account and just used it over the years for various reasons. Much later on reflection, he wished his mother had said something like “it is my wish that you use this money for memorable occasions such as vacations, or even gifts to one another.” This way every time he spent the money, or remembered the vacation, he would have thought of mom also. That’s a pretty nice thought. That shows love and caring in my book.
So now let’s talk about what it means to give a gift in Trust. This is the most flexible way to give a gift to another person. A gift given in Trust can be outright, even though it is given in Trust, and on the other side of the spectrum, a gift in trust can be held by the Trustee (someone other than the Beneficiary) and distributed to the Beneficiary at the discretion of the Trustee. This provides the most protection for the Beneficiary.
For more on protecting the Beneficiary’s inheritance, please see my blog here:
So because of the protection that a Trust provides, and because we can provide guidance – from mild to extensive – giving items in Trust is the preferred method of distributing our assets to the next generation.
See lots of estate planning information on my website at: www.myestate-plan.com
I am never too busy to help, and I do my best to answer my phone every time it rings. Call me and let’s get your Estate Plan together to get you the peace of mind it provides.
Thanks for reading my blog.
William Daniel Powell
This document is for informational purposes only. Nothing in this is to be considered legal advice. Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship. If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction. I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.
Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.