Coach’s Corner

Death is no one's favorite topic, so it's not surprising that parents often fail to communicate their estate plan details with their children. If you have a client or prospective client on the verge of an inheritance, you can bring value to the situation by helping them decode the terms to understand how and when they will receive the newfound wealth.

How will inheritance be received?

Uncover whether your client is receiving the inheritance outright or in trust. When assets are received in trust, which is typical with a larger inheritance, it's important to determine how much control the recipient will have over the funds. Knowing the terms of the trust, such as whether distributions of principal and income are mandatory, will help you determine your client's access level to trust assets.

Question to ask: Do you know if this inheritance will be received outright or in trust?

When will funds be received?

For assets held in trust, clients need to understand if and when principal will be paid out. Payments may be mandatory or at the discretion of the appointed trustee. With smaller trusts it is very common to see principal paid out at certain ages, such as 1/3 at 30, 1/3 at 40 and 1/3 at 50.

In other cases, principal will be paid only at the trustee's discretion. This is particularly common with generation skipping trusts where there is a tax benefit to retaining as much principal in the trust as possible.

If payments are at the discretion of the trustee, ask if the trust documents encourage discretionary distributions for certain life events, such as the purchase of a first home.

Question to ask: Are payments of income to you mandatory?

Question to ask: What level of access do you have to trust principal?

Bottom line: Position yourself to help clients and prospective clients plan for their newfound wealth by first understanding how and when the assets will be received.