At one time, many people believed that leaving your assets in trust for your children was trying to maintain control from the grave. This attitude has shifted as more people have realized that a trust may be necessary to protect one’s children and grandchildren. Sometimes, it may be in a child’s best interest to not have complete access to the inheritance that was left to them.
Here are a few reasons why you might want to consider putting your children’s inheritance into a trust:
One of the most important reasons to put your child’s inheritance into a trust is to protect it from divorce and creditors. When someone divorces, inherited money that is held in trust is not considered to be part of the marital estate. It is a sad fact that divorce rates are very high, and statistically, when your child gets married there is about a 50% chance that the child will eventually divorce. If this happens, you will want your child’s inheritance preserved for the child, and for your grandchildren. Money held in trust may also be shielded from to creditors so it will be safe, even if your child runs into financial problems later in life.
Placing your child’s inheritance in a trust is also a method of keeping it in your family. When assets are in trust and your child cannot take them out and dispose of them, they also cannot put their spouse’s name on the assets. Although in some cases having the spouse’s name on assets jointly with your child may not be a bad idea, keep in mind that if they divorce, the spouse may have some claim to the assets. In addition to this, if your child dies and the spouse remarries, the new spouse could have claim to the assets, and not your grandchildren.
Another advantage of putting an inheritance in trust is that you can appoint a trustee to administer the trust and ensure that the assets are properly invested, as well as providing a controlled distribution of funds to the trust’s beneficiaries. This is especially useful if you feel that your child may not be capable of investing responsibly if the money is left directly to him or her. You can include terms in the trust call for distributions after they reach a certain age, or have graduated from high school, college etc.
There are many benefits to leaving your children’s inheritance in a trust, but the main benefit is that it can provide protection and security for your children.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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