An Overview of Situational Inheritance Planning

Why should you work with an estate planning lawyer to put a plan in place? This is a broad question, and there are multiple different reasons why professional assistance is invaluable.

There is no single approach to the process that is right for everyone. The ideal way to proceed will depend on the circumstances, and there are multiple ways to transfer assets.

You should consider the life situation and personal proclivities of the people on your inheritance list and use the right tool for the right job. Let’s look at a few of these situations that call for targeted solutions.

Special Needs Planning

Many people with disabilities rely on Medicaid as a source of much-needed health insurance, and Supplemental Security Income is self-explanatory. This program provides a modest but steady stream of income for people who do not have much earning power.

Since these are need-based programs, a change in financial status can potentially cause a loss of eligibility. With this in mind, you should use a supplemental needs trust if you have a government benefit recipient on your inheritance list.

You would fund the trust and name a trustee to act as the administrator. Any adult who is willing to assume the role can act as a trustee from a legal perspective, but there are also professional fiduciaries that are familiar with the applicable regulations and offer trustee services.

The trustee would be able to use assets in the trust to satisfy the beneficiary’s unmet needs, and the government benefits would not be negatively impacted. Any remainder that is left in the trust after the death of the beneficiary would go to a successor that you name in the trust agreement.

Spendthrift Protections

It can be disconcerting to leave a significant inheritance to a loved one who is not good with money. The individual could burn through the funds far too quickly and have nowhere to turn in the future when times get hard.

Under these circumstances, you could establish and fund a revocable living trust with a spendthrift provision. You would act as the trustee while you are alive and well, and you would name a successor to assume the role after your passing.

After your death, the trust would become irrevocable, and the principal would be protected from the beneficiary’s creditors. The trustee could be instructed to distribute a certain amount each month, or you could dictate some other type of incremental arrangement.

Many people will provide larger lump sum distributions when the beneficiary reaches certain age thresholds. If you take this approach, you can go forward with the knowledge that you have done everything in your power to protect the beneficiary.

Incentive Trust

A large inheritance could extinguish an individual’s personal motivation, and this can be a source of concern. As a response, you could establish an incentive trust.

For example, let’s say that you want a young heir to attend college and contribute in the workplace. You could instruct the trustee to pay tuition and all expenses as long as the beneficiary is a student in good standing.

After graduation, you can provide a dollar for dollar match of the beneficiary’s earnings on the job to promote work ethic. You can alternately use an incentive trust to guide someone away from self-destructive behavior like a substance abuse or gambling addiction.

We Are Here to Help!

These are a handful of the asset transfer methods and the reasons why you may want to use them, but there are others.

When you choose our firm, we will gain an understanding of your unique situation, apprise you of your options, and make recommendations. At the end of the process, you will walk away with a custom crafted plan that ideally suits your needs.

You can schedule a consultation at our Charlotte, North Carolina or Huntersville, North Carolina office if you call us at 704-944-3245. The number in Ashland, Kentucky is 606-324-5516, and the number in Florence, Kentucky is 859-372-6655.  You can also use our contact form if you would prefer to send us a message.