Your children mean the world to you. You’ve done everything within your power to meet their needs and to ward off dangers. You keep a watchful eye out for them, whether they’re swimming in the ocean or wandering too close to the edge of the Grand Canyon. You provide for their needs, from putting food on the table to buying new clothes for school.We cannot protect our children from every risk in life. When they grow up, they will make some mistakes, just as we did. However, we can afford them some financial protection by leaving their inheritance in trust.
A trust can help because it holds legal title to assets, even though as beneficiary, your child will hold beneficial title. By leaving your assets to your child in a “Family Access Trust,” he or she could still get to the assets at any time. He or she could even remove all the assets from the trust, if desired. Yet, while assets remain in the trust, the trust can protect the assets from your child’s divorcing spouse and, in most states, keeps your child’s future ex-spouse from taking your child’s inheritance.
A Family Access Trust will not act to protect assets from other creditors, however. In order to accomplish that goal, you need a “Family Sentry Trust,” which is a discretionary trust for the benefit of your child. Distributions to your child are made by the person (Trustee) you appoint to make decisions for the trust.
Your child could be a Co-Trustee, but could not act alone to make distributions. Your child could be named as the Investment Trustee and, in that capacity, could direct how the assets are invested. A Family Sentry Trust protects your child from most of their creditors, subject to state law. An additional benefit is that, with a Family Sentry Trust, the assets are not taxed to your child’s estate for estate tax purposes.
You’ve spent your life building your legacy. That legacy will become your child’s inheritance. Keep that inheritance from being attached by future ex-spouses or other creditors. A qualified estate planning attorney can help you provide for your children, and not their creditors.
For more helpful information about estate planning, please visit www.smithbarid.com.