Welcome to Ask Money Talks News, a series answering financial questions submitted by Money Talks Newsletter subscribers.
In this installment, we’re talking about the options available to someone setting up a trust — which is a legal entity that holds assets to be distributed upon the death of the person who set up the trust or the person for whom it was set up.
Norma Jean asks Money Talks News:
“My mom named me as executrix of her estate. She just died, and I am to meet with an attorney next week. She was purposely vague in her instructions, saying I could dispose of most of her estate as I saw fit. Privately, she asked me to set up some kind of a fund where a sibling could get a monthly income, but not the full amount at once. This is due to the partner of sibling having a drug addiction.
Mother was also adamant that the sibling’s partner (of about two years) would get nothing upon death of the sibling. How can this best be done?
Additional fact, state is Virginia.”
Condolences on your loss, Norma Jean.
Meeting with your attorney to discuss what type of trust you’ll need is a good move. Again, a trust is a legal entity that holds assets to be distributed upon someone’s death. In this case, your mom asked you to distribute the funds (which makes you the executor or executrix of the trust). So your attorney will set up the trust based on your instructions.
Various types of trusts can be established to provide a monthly income for your sibling (who is a beneficiary of your mother’s trust). For example, a revocable trust, also called a living trust, would allow you to make changes to the trust after it is established if you need to do so. More importantly, you could have the funds distributed as you choose.
You could add instructions on when your sibling’s income payments will stop — such as upon the sibling’s death — to ensure your sibling’s partner does not receive any funds. Once you’ve decided how and when your sibling will receive income from the trust, your attorney will record the documents with the state to make the trust legal.
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