Five Alternatives to Leaving Inheritance Outright

Standard      

The default law in Arizona leaves inheritance outright and free of trust.  However, if the beneficiary is incapacitated or under age 21, the Personal Representative or Trustee, as the case may be, will have discretion to distribute inheritance by any one or more of the following methods:

• Distribute directly to the beneficiary;
• Distribute to the beneficiary’s guardian, conservator, parent, other family member, or any person who has assumed the responsibility of caring for the beneficiary;
• Distribute to any person or entity as custodian for the beneficiary under the Uniform Transfers to Minors Act;
• Distribute to other persons and entities for the beneficiary’s use and benefit;
• Distribute to an agent authorized to act for the beneficiary under a financial power of attorney executed by the beneficiary before becoming incapacitated; or
• Retain in trust until the beneficiary is no longer incapacitated or attains age 21.

Option #1     Hold in temporary inheritance trust for beneficiary with all remaining assets distributed outright when beneficiary attains [25] years of age.

Option #2     Hold in temporary inheritance trust for beneficiary with assets distributed in stages by age.  For example, 1/3 of trust assets at age [21], 1/2 of remaining assets at age [25], and all remaining assets at age [30].

Option #3     Hold in temporary inheritance trust for beneficiary with assets distributed in stages by time.  For example, 1/3 of trust assets immediately, 1/2 of remaining assets [3] years later, and all remaining assets [5] years later. 

Option #4     Hold in permanent inheritance trust for beneficiary with assets managed by an independent or professional trustee.  For example, a trust for mentally-disabled adult beneficiary or beneficiary with substance abuse problems. 

Option #5     Hold in permanent inheritance trust for beneficiary, but permit beneficiary to serve as trustee at any time after attaining age [30] or to name an independent trustee of the beneficiary’s choice.

For more information about inheritance protection trusts, check out this article.