Estate Planning School - Lifetime Trusts
Can you protect a beneficiary's inheritance from divorce or creditors?
Trying to protect a beneficiary from themselves? Asset protection is frequently a part of an estate plan, and that can even include protecting assets after they’ve passed from you to your beneficiaries. If you’re concerned about protecting your estate from your beneficiary’s missteps, you need to act while you’re alive to prevent creditors from going after their inheritance.
Picture this: your estate plan leaves your estate directly to your darling son. You love the idea of the money going to ASAP, but now that inheritance is all his, just like any of his other assets. This means your son’s creditor’s, divorcing spouses, and other claimants can seek to stake a claim on that inheritance you’ve left him. Wouldn’t it be nice if you could get the inheritance to your son, but also with some protection?
Clever estate planners will accomplish this with lifetime trusts. Rather than leaving the money directly to your son, you instead leave the inheritance to a trust you create for his benefit: his lifetime trust. You can even allow your son to serve as the trustee of his lifetime trust. Your son can use the inheritance held in that lifetime trust for his benefit, but because the trust was
- created by you, not him,
- funded only with your assets after you die, never your son’s assets, and
- made irrevocable at your death,
your beneficiary’s creditor’s, divorcing spouses, and other claimants cannot seek to claim the inheritance from him.
Lifetime trusts offer asset protection to inheritances.
Lifetime trusts can also be used as a tool to manage distributions to a beneficiary throughout their lifetime. Rather than naming the beneficiary as trustee, you can name a third-party trustee to make periodic distributions to your beneficiary over a period of time instead of giving them access all at once. Worried about the inheritance going somewhere you don’t want it to when your beneficiary dies (like your beneficiary’s spouse)? You set the terms of the lifetime trust, including who benefits from it after your beneficiary has died.
Lifetime trusts can be a powerful estate planning and asset protection tool, so long as you create them as part of your estate plan while you’re alive. To find out more about lifetime trusts, call and inquire or attend one of our popular estate planning seminars.
