Quora Answer: What are the Best Ways to Give Money to Your Heirs While You are Alive?

The following is my answer to a Quora question: “What are the best ways to give money to your heirs while you are alive?”

You have many options, and many forms of transferring wealth.  One of the best ways is to set up a revocable or irrevocable trust, with yourself as settlor, and trustee.  You can even make yourself a beneficiary while you still live, and revert the trust to a testamentary trust upon your passing.

Firstly, a trust is a distinct legal entity, which protects your wealth in the event of a bankruptcy petition, or a law suit.  It is also useful in the case of an acrimonious divorce.

Secondly, a trust mitigates your tax exposure, and your beneficiaries get their stipend tax free since it is the duty of the trust to pay the tax before disbursement of funds in every case.  Since trusts account for holdings after expenses, unlike personal assets, this is a huge advantage.

Finally, as a trustee yourself, you have full control of which beneficiaries benefit, according to how much, and the discretion to add or remove beneficiaries.  As a trust, you also have the option of investing your funds, and stipulating disbursement conditions and periods that cover multiple generations.