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Advantages of Staggering an Inheritance in Kentucky

Staggering an Inheritance in Kentucky

When you’re developing your estate plan, you have a lot of important decisions to make. You have to think about who receives which assets and how those assets are distributed. While most people assume that a lump sum is the only way to distribute assets, a staggered inheritance offers unique benefits to beneficiaries.

Wondering if staggered inheritances are the right choice for your beneficiaries? Learn more about your options now by calling John H. Ruby & Associates at 502-373-8044.

Protecting Assets from Creditors

If your beneficiaries receive one large sum, that money is vulnerable. Even if they spend it wisely and maintain it over the course of their life, they could be in trouble if they get in over their head with debt, gambling, or other financial issues. That entire inheritance could be subject to seizure to cover their debts. When they receive distributions from a trust, the rest of the money in the trust belongs to the trust until it is distributed. This may offer some protection.

Minimizing the Risk of Overspending or Mismanagement

One of the main reasons people structure a trust is to avoid overspending or financial mismanagement on the part of their beneficiaries. This just makes sense, especially if your beneficiaries are very young or very irresponsible. A 20-year-old who receives $500,000 once can make a lot of bad decisions in a very short time. If they receive, instead, $2,000 a month for decades to come, the damage they can do is limited. And presumably, they will eventually calm down, learn the errors of their ways, and start making better financial choices.

A staggered inheritance can also protect beneficiaries from mismanagement by other people. When people find out about large inheritances, the vultures start circling. People all have their own investments they’d like your beneficiary to put money into or money-making scams that well-meaning people may buy into. When most of that inheritance is locked away, the beneficiaries are protected from those who would defraud them.

Financial Responsibility

A staggered trust essentially forces beneficiaries to learn financial responsibility over the course of their lifetime. Take the example from above. If someone blows through $500,000 in a year, that is an incredibly painful and expensive lesson—and they have no more money to fall back on. But if that same person receives $2,000 per month, they will probably spend several months blowing through the full $2,000 in the first few days of the month. But after a while, they will get tired of living like that. They’ll realize there’s probably a better way to use their money and protect their inheritance. With guidance from those around them, they may even reach out to a financial advisor to learn how best to protect their inheritance and make it work for them.

Lifelong Support vs. a One-Time Windfall

The inheritance you give to your beneficiaries reflects a lifetime of hard work and sacrifice. It’s natural to want that legacy to live for as long as possible. Yes, a massive inheritance can make a splash and make a huge one-time difference in beneficiaries’ lives. Those who receive staggered inheritances, though, can enjoy ongoing financial support for the rest of their lives. This ensures that they have money to fall back on if life throws them a curveball. A large inheritance could help you pay off a mortgage and student loans, but a staggered inheritance could help you chip away at debt early on and then cover massive medical bills after a serious injury 20 years down the road.

You never know what life will throw at your beneficiaries. A staggered inheritance allows your money to grow over time, and it also helps your beneficiaries with all the difficulties they may face at each stage of life. If you have young or financially careless beneficiaries, this tool could preserve your legacy.

Explore Your Estate Planning Options with John H. Ruby & Associates

No matter where you are in your estate planning journey, it always helps to have the right legal guidance. Find out how the team at John H. Ruby & Associates can help you accomplish your goals. Fill out our online contact form or call us at 502-373-8044 to set up a consultation now.